Nathan Lim
Australia Headlines
- Western Australia’s energy market is broken – wholesale electricity prices ($180 per megawatt hour) cost more than unsubsidised solar and wind, more than double rates in Eastern Australia
- Renewable Energy Target review delivers on preconceived conclusion – local renewable energy industry in peril
AEI Assessment
The Renewable Energy Target review lead by climate skeptic Dick Warburton has recommended changes that would effectively arrest renewable energy development in Australia. While the grandfathering option in the recommendation should provide some security for existing investments (assuming it is adopted), there is nothing to support further large scale developments. We are disappointed that the government seems to be deliberately ignoring the global trend whereby nations are reducing their emission intensity from power generation to address climate change. Support for this trend also comes from the added benefit that it also improves local air quality.
North America Headlines
- California oil refiners take in record oil-by-rail from Utah
- Colorado activists drop fracking opposition in return for new task force to address concerns regarding hydraulic fracturing
- Consolidated Edison sees nearly 100% growth in solar rooftop installation in 2013 – solar cheaper than residential electricity rate
- Democrats increasingly backing oil and gas industry
- Energy Information Administration (EIA) says imported oil to meet 22% of US demand, the lowest level since 1970
- Reinstatement of the Production Tax Credit by Congress before year end remains highly uncertain
- California, under Assembly Bill No.327, starts rulemaking process to integrate cost-effective distributed energy resources into the grid
- Department of Energy, 2013 Wind Technologies Market Report – Wind Power Purchase Agreements at record low of US$25 per megawatt hour
- California passes bill to streamline residential solar applications and installations
- Gina McCarthy, Environmental Protection Agency (EPA) head, says renewable fuel standard ruling out shortly and could be higher because of increased gasoline usage
- EPA to decide this year whether to regulate methane emission from drilling (fugitive emissions)
- FutureGen 2.0 (experimental near-zero emission coal plant) gets EPA approval for CO2 injection wells
- EPA must rule by December 1 on Ozone standard. Tightening to 60-70 parts per billions will impact power generators through additional nitrogen oxides and volatile organic compound abatement equipment
AEI Assessment
The policy debate around shale oil and gas continues to swing towards the moderates and away from the critics. The growing realisation of its transformational impact on the economy has broadened its appeal as it seems to hold the promise of jobs, prosperity and energy security. As a result we have raised our assessment for oil to Positive.
Renewable energy support policy continues to slide but the cost of solar and wind has fallen so dramatically that financial supports are becoming decreasingly important. As noted above rooftop solar and large scale wind are now competitive in conventional energy markets. Even after deducting the benefits of various subsidies, the economics are not so drastically affected as to completely negate renewable energy’s competitive position. Scale in both technologies and sensible policy support (like California’s decision to make rooftop solar installations less bureaucratic), continues to drive cost down making renewables so close to being strongly competitive against conventional energy on an unsubsidised basis.
The EPA is signalling its strong desire to continue to improve air quality by all means possible with FutureGen now able to proceed to construction and the department’s finding that ozone levels still too high.
Europe Headlines
- UK Department of Energy and Climate Change, less than one-quarter of UK public support shale gas development
- German electricity price go negative again from high wind production
- Italy passes changes to Feed-in-Tariffs for solar, effectively a 20% retroactive cut
- European Commission expected to confirm 40% carbon emission target by 2030 in October, efficiency and renewable targets to be considered
- Ukraine and Russia moving towards a permanent ceasefire
AEI Assessment
The next major policy development for the EU is their 2030 targets. Preliminary discussions continue to suggest efficiency and renewable targets will only be binding at the EU level and not at the country level. Given the ongoing divergence in energy policy amongst member states (Poland versus everyone else essentially), this seems to be a reasonable compromise as it recognises that some countries are more willing than others to migrate to higher levels of renewable energy and take responsibility for their contribution to climate change. Countries have exceeded EU targets in the past so an aggregate target does make sense as long as there are not too many other countries looking to get a free ride. Making the efficiency target non-binding is disappointing though as these are easily the most direct and least difficult technologically to reduce a nation’s energy intensity.
A political resolution in the Ukraine, at the time of publication, appears to be in the making which will substantially reduce the political risk in this region.
China Headlines
- Beijing cuts coal consumption 7% in first six months of 2014
- Smaller cities steer away from GDP as primary performance metrics, focus on raising living standards for poor, reducing poverty and environmental protection
- 70% of Chinese coal companies losing money as coal price at seven year low
- China appeals mixed World Trade Organisation ruling on US duties levied on solar panels, wind towers
- National Development and Reform Commission says China will start national carbon trading by 2016
AEI Assessment
It is becoming abundantly clear that China has recognised that business-as-usual will further aggravate the economic, societal and environmental imbalances in the country. Bringing forward its national carbon trading market and the move away from solely using GDP as a measure of success is tacit recognition by the government that externalities cannot be ignored forever. This will continue to put downward pressure on energy intensive, high emission industries.
Japan Headlines
- Japan has added 9,770 megawatts of clean energy since July 2012 – 98% is solar
- Minister of Environment, Japan should target 30% renewables by 2030
- Abe appoints new cabinet with the popular Yuko Obuchi tasked to push through the unpopular nuclear re-start agenda
AEI Assessment
Japan’s version of President Obama’s “all of the above” energy policy is best demonstrated by the expansion of solar power over the past two years. Over this time, Japan has approved an astonishing 65 gigawatts of new solar projects which actually exceeds Australia’s entire installed base of all forms of generation. The comment made by the Minister of Environment hardly seems necessary but is an important recognition by the government of the role of renewable energy in the energy mix. Yuko Obuchi appointment as the first female Trade and Industry Minister is hoped to appeal to the broader electorate as a recent Nikkei newspaper poll found 65% of female respondents opposed restarting Japan’s nuclear fleet.
Global Headlines
- India is considering adopting a Feed-in-Tariff regime for solar
- India proposing 10,000 megawatts of wind per year
- Brazil energy auction attracts offers of 26 gigawatts of wind, solar
- Africa to install more renewable power in 2014 than in previous 14 years
- 2,200 cellphone towers in India to be powered exclusively with solar
- India does not impose solar dumping duties
- Global solar installations on track for record for 2014, 52 gigawatts
- India’s Prime Minister Modi says good governance and clean energy are top priority
AEI Assessment
Momentum is building for an energy transformation in India and Africa. The deployment of solar cellphone towers in India is significant because it was needed to address the lack of dependable power in the area. This is a reflection of the larger problem facing the developing world where a centralised grid strategy has failed to lift nations out of energy poverty. Building a distributed energy grid around where energy is consumed instead of where resources are located is expected to be a fundamental principle in grid deployment in the developing world.