The lower costs for solar products is having knock-on effects for many companies. The latest to show signs have been in Japan, where results at some of the country’s biggest manufacturers of solar products are flagging.
For the most recent quarter, Japan’s major photovoltaic panel makers such as Sharp Corp., Panasonic Corp., and Kyocera Corp. all reported lower sales at their solar businesses. Japanese refinery Showa Shell Sekiyu K.K. booked a 10.7 billion yen ($96 million) impairment charge for the year ended Dec. 31 on subsidiary Solar Frontier K.K.
A pullback in government incentives, declining solar panel prices and weakening demand for products for the residential rooftop market are conspiring to take the fizz out of what was one of the world’s most promising solar markets just a few years ago. New solar installations in the island nation could drop by as much as a third this year, according to the most pessimistic forecast from Bloomberg New Energy Finance.
The conundrum for manufacturers and developers was underscored in India, where the price of solar power fell to a record in a competitive tender in the central Madhya Pradesh state, showing appetite among developers to work in the nation as growth slows in the leading markets of China and Japan.
Rewa Ultra Mega Solar Power, a joint venture involving Solar Energy Corp. of India and the state government, received a levelized tariff bid of 3.30 rupees (5 cents) a kilowatt-hour for 750 megawatts of capacity, an official who helped organize the auction said. That’s lower than the previous record of 4.34 rupees a unit achieved a year ago.
Plummeting costs for solar panels along with the structure of the tender helped reduce prices. The result will help Prime Minister Narendra Modi’s government meet its pledges to install 175 gigawatts of renewable capacity by 2022 and spur discussion about whether India can rely on solar for more of its electricity.
As part of the country’s moves to expand renewable power use, India plans to open a website to monitor whether state-owned power retailers comply with their obligations to buy renewable energy, a step toward ensuring a healthy market for clean energy.
The compliance website is being designed by India’s electricity regulator, the Central Electricity Regulatory Commission, said a commission official who requested anonymity because he’s not authorized to speak with the media. The website will be rolled out in six to 12 months.
Of the country’s 35 states and Union Territories, just six fulfilled mandated quotas for renewable energy for the financial year ended in March 2016, according to government data. Another eight met more than 60 percent of their obligations, while the majority fell below this mark.
Finally, in the Americas, Mexico will soon see a solar surge, according to Jigar Shah, a U.S. renewable energy pioneer who’s in talks with a local private equity fund to help make it happen.
“The thing about solar is that it’s small—until it’s not,” Shah said. “There will be a light switch that gets turned on in terms of finance and being comfortable with certain risks in Mexico. Once that light switch gets turned on, I think you’ll see a colossal boom in solar deployment.”
That said, it will need to be big. Less than 1 percent of Mexico’s power was generated by solar in 2016, with about 270 megawatts of installed solar capacity as of June. The energy ministry forecasts more than $5 billion of investment and at least 4,000 megawatts of new capacity by 2020.
Outside solar, last week the U.K. chalked up a record for the market share of cars powered by electricity and other low-emission fuels, according industry figures. Sales of vehicles running on alternative fuels grew almost a fifth, to 4.2 percent, compared to 3.6 percent during the same period last year, according to the Society of Motor Manufacturers and Traders. Registrations of diesel-fueled vehicles fell 4.3 percent compared to January 2016.
Still in Europe, the decline in renewable energy costs continues. Germany’s wind-power industry expects another year of cheaper energy generated by onshore turbines, with prices anticipated to tumble in tandem with offshore electricity when auctions begin in May.
The government is rolling out auctions for land- and sea-based wind projects in the first half of the year with the goal of pushing down prices and managing increased use of intermittent energy on its grid. Auctions represent another turn for Germany’s pioneering adoption of clean energy, which has resulted in the highest European adoption of renewables in its biggest economy.
Meanwhile, investments linked to climate change in Asia are still rising. The Asian Development Bank approved $3.7 billion in climate finance investments in 2016, a 42 percent increase from the previous year, to support efforts in developing member countries.
The bank is committed to raising climate financing to $6 billion by 2020, ADB President Takehiko Nakao said. The spending on climate change is expected to increase to account for about 30 percent of its overall financing by 2020, he said.
China, for its part, will begin a trial for trading renewable-energy certificates later this year, creating an alternative way for developers to profit from solar or wind power without relying on government subsidies. The certificates, which will act as proof that non-hydro renewable energy is being generated or consumed, will be verified and issued by China’s Renewable Energy Information Management Center. Wind or solar generators that sell the certificates will no longer receive subsidies for their projects, the NDRC said.
At the same time, China’s preparations for carbon trading are moving forwards. New rules to help allocate emission quotas for a national trading scheme the world’s biggest carbon emitter aims to start later this year are getting closer, according to a policy adviser.
In preparation for the national carbon market, China has been collecting emissions data since 2016 from all industries to be covered, according to SinoCarbon Innovation & Investment Co., which belongs to a group of organizations advising the government on a policy framework for carbon trading.
Carbon trading reform in Europe was back in the news last week as four Nordic utilities called for changes to Europe’s emissions market, joining Germany and Britain in seeking reforms that will reduce a glut of pollution permits.
The chief executives of Dong A/S, Fortum Oyj, Statkraft AS and Vattenfall AB wrote to lawmakers to support proposals that will speed up the removal of allowances from the market from 2019, according to the letter e-mailed to Bloomberg News. The utilities also said the reduction in the size of the market’s annual emissions cap should steepen.
US President Donald Trump’s ability to prop-up the country’s coal industry will be limited to attacks on policies that have yet to hit their compliance periods, such as the new Coal Combustion Residuals (CCR) and Effluent Limitation Guidelines (ELG). These two regulations will likely impose compliance costs on at least 52GW of coal plants, according to Bloomberg New Energy Finance analysis.
Q&A of the week
Delta cuts carbon 13% from 2005, finds biofuel costly
Delta Air Lines, the world’s largest airline by market capitalisation ($36.2bn), said it has cut absolute emissions by 13% since 2005, and is aiming to reach a 50% reduction by 2050.
The company’s emissions have been edging upwards since 2012, and Delta has been voluntarily offsetting that — a factor Christine Boucher, Delta’s managing director for global environment, sustainability and compliance, said she sees as a “distinguisher” from its peers. The ultimate goal is a 50% reduction in carbon emissions from a 2005 baseline by 2050.
As part of its fuel emissions reduction strategy, Delta also looks at biofuels. “We think that biofuels are very important for the airline industry”, said Boucher, but a lack of capacity and financial sustainability are challenges. “When you consume millions of gallons of jet fuel per year”, she said, “even a few pennies make a difference, much less the difference of $20 a barrel — that is a significant cost to Delta and consumers.”
In October 2016, the International Civil Aviation Organization’s (ICAO) global market-based measure (GMBM) was agreed. The GMBM – termed the “Carbon Offsetting and Reduction Scheme for International Aviation” (Corsia) — is aimed at bringing about in the airline sector ICAO’s goal of achieving carbon-neutral growth from 2020, although the programme will be voluntary until 2027.
Delta said it supports what was done at ICAO, but Boucher said there is now a lot of work to be done behind the scenes to create a good monitoring, reporting and verification structure, and to ensure the broadest number of credits are available, as “there is going to be a very large demand for carbon offsets post-2020”. When asked about the costs of these offsets, Boucher said that “[it] will be a significant number” when considering airline growth projections over the 15-year period.
Bloomberg New Energy Finance spoke with Boucher about the company’s carbon and fuel efficiency goals, its view on biofuels and what the ICAO decisions mean for Delta.
The interview is an extract from the Bloomberg Clean Energy and Carbon Brief published yesterday.
Q: How is Delta Air Lines progressing with its carbon and fuel efficiency goals?
A: Our carbon and fuel efficiency goals are aligned with the IATA [International Air Transport Association] goals. We are working towards a short-term goal of an average annual fuel efficiency improvement of 1.5% through 2020. We are at about a 6% fuel efficiency improvement (from 2009 levels) and have a fuel council that meets monthly looking for opportunities to increase our fuel efficiency.
The medium-term goal is carbon-neutral growth starting in 2020. Delta has purchased and retired carbon offsets in 2013, 2014 and 2015 to achieve carbon-neutral growth relative to 2012. The [respective] IATA goal is related to international emissions from aviation but our offsetting looks at our total carbon footprint from domestic and international flights as well as ground-based emissions. We are in good shape for the medium-term goal.
Q: Will you go beyond the IATA goals?
A: There are two aspects to our sustainability focus —social/environmental sustainability and financial sustainability. We evaluate our environmental sustainability goals annually and seek the input of our leadership team on those goals, so it is something we will consider as part of our overall sustainability approach. The airline industry faces a lot of challenges with volatile fuel costs so we are always going to be focused on our emissions as part of our overall fuel strategy…
