This is a wrap of energy policy initiative from around the globe by Nathan Lim, investment manager at Australian Ethical Investments.
Highlights include:
Distributed generation gaining momentum with the Arizona Public Service Company wanting to enter the solar rooftop business
Europe’s energy policy continues to swing towards the moderates
China continues to pull out the stops to tackle its appalling air pollution – electric cars, solar, hydro and nuclear moving forward
Nuclear restart in Japan looking to become significantly drawn out
Australia’s CEFC demonstrating how good policy can address a market failure
North America Headlines
∑ New York’s highest court rules that towns can ban fracking on their land
∑ US and China sign agreement to cooperate on carbon capture and smart grid – John Kerry says growing common ground with China on climate change
∑ Environmental Protection Agency (EPA) starts process to ban super Green House Gases (GHG)
∑ Iowa Supreme Court rules that local solar developer is allowed to sell power to city
∑ World Trade Organisation (WTO) rules against US in solar trade war
∑ EPA planning new mileage test for cars to be ready by 2015 – current methods not reflective of real world driving
∑ Colorado court strikes down municipal fracking ban at Longmont
∑ US sets import duties on China and Taiwan made solar panels as high as 165%
∑ Arizona Public Service Company applying to operate regulated solar rooftop business
∑ EPA extends compliance deadline for 2013 Renewable Fuel Standard (RFS) for a third time – still working on 2014 standard
∑ Leaked draft of EPA shale waste water regulation requires greater pretreatment before being sent to disposal site.
AEI Assessment
The solar trade war is become more contentious as the industry has become a material contributor to the global economy and policy broadly continues to lean towards a lower emission power sector. Opportunities in solar and natural gas remain squarely a state-by-state assessment as state level court rulings are inconsistent. What is particularly frustrating is the EPA’s inability to keep to its own timeframes with the RFS now hopelessly late –eliminating policy uncertainty includes the timely implementation of the rules. The Arizona Public Service Company’s application to operate a solar rooftop business is the best indicator yet that the old, centralized power generation model is changing. Flat to declining mains power consumption (this is electricity consumed from the grid) has awoken utilities to the realization that their monopoly on power generation is coming to an end. We take this development as instructive for the entire power sector and avoid companies that are fighting/ignoring the distributed generation trend.
Europe Headlines
∑ German Parliament has voted through its new energy laws
∑ German coal plants are amongst Europe’s most polluting with Germany using more coal for electricity than any other EU country
∑ A resolution to the excess EU emission trading scheme credits has been pushed back to September at the earliest.
∑ UK Energy Secretary Ed Davey says UK will keep greenhouse gas target of a 50% reduction cut by 2025.
∑ EU Commission agrees to improve energy efficiency 30% by 2030 but is not binding at the country level
∑ UK opens bidding for a new round of shale gas exploration
∑ Spain installs one 80 kilowatt wind turbine in past six months
∑ France begins legislative process for €10 billion clean energy and efficiency legislation
∑ Germany drops proposed green power line route amid strong opposition
∑ UK import dependency on foreign fuels rises to highest in 39 Years
∑ UK coal plants get three year support under capacity rules
AEI Assessment
Renewable energy policy remains in flux across the EU as those countries that raced ahead with the most ambitious plans are now racketing back state support that has proven financially unsustainable. That the EU Commission supports a 30% efficiency target for 2030 but has not made it binding at the country level is typical of the compromised policy coming from Europe that on the one hand sets an ambitious target but lacks conviction in its purpose. That said the continued push for a lower emission economy remains unmistakable, albeit with moderation and sensibilities learned from the mistakes made by the Germans and Spanish. The events in the Ukraine have also brought renewed focus on energy security because being overly dependent on foreign imports puts the balance of power uncomfortably on the other foot – cheap energy is nice but dependable energy is more valuable.
China Headlines
∑ China will promote the increased use of electric, plug in hybrid and fuel cell vehicles with preferential policy support to 2020 like its target for 30% of new government vehicles to use next generation drivetrains. However, subsidies most likely only for local made electric, hybrid cars
∑ China admits it will not meet its offshore wind targets, too expensive to build
∑ Beijing to add 1,300 electric taxis and 1,000 fast charging points this year
∑ Westinghouse’s first AP1000 nuclear reactor expected to commission in Sanmen soon
∑ Record hydro production from Three Gorges dam and other newer dams reducing demand for imported coal and hurting shipping rates.
∑ China reportedly about to announce policy to encourage solar rooftop installations
AEI Assessment
Appalling levels of air pollution keeps China focused on driving policy to rapidly improve the situation. It is good to see that policy is not narrowly focused on just power generation as transport and industrial emissions are just as meaningful. Westinghouse’s AP1000 nuclear reactor will be amongst the most advanced reactors ever built with improved “passive safety” features. A successful commissioning is necessary as nuclear power plays a major role in China’s long term goals to reduce emissions from the power sector.
Japan Headlines
∑ The nuclear regulator states two Kyushu nuclear reactors are safe to be restarted
∑ The government is considering requiring Tokyo Gas, Osaka Gas and Toho Gas to separate from their pipeline operations ahead of the liberation of the natural gas market
AEI Assessment
Waning political support for Prime Minister Abe’s leadership suggests the restart of Japan’s nuclear fleet is not as certain as it seemed just six months ago. At this time, it seems more likely a restart will be significantly drawn out and result in fewer restarts in the immediate future. The liberalization of Japan’s energy sector should breathe new investment into the industry as its transitions away from nuclear power.
Australia Headlines
∑ The carbon tax legislation was repealed by the Senate
∑ Environment Minister Greg Hunt signaled he may allow domestic companies the ability to use international carbon permits to meet abatement targets
∑ The Clean Energy Finance Corp (CEFC) is to provide $120 million for rooftop solar finance opportunities in South Australia
AEI Assessment
We applaud the actions taken by the CEFC because this is a good example where policy has addressed a market failure. Given the success solar leasing has experienced in the United States and the very high retail price of electricity in South Australia, we find it surprising local financing was not more forthcoming for such schemes. The CEFC along with SunEdison will undoubtedly open up the solar leasing market in this country once they simply repeat what has already been proved overseas.
With the repeal of the carbon tax, all attention now falls on the Renewable Energy Target review currently being conducted by Dick Warburton. Our hope is for at least the principle of moving towards a lower emission power sector is preserved in the review.
Global Headlines
∑ India is reportedly about to table a plan for 20GW of large scale solar projects. If enacted, this would only further shift the growth in the solar industry away from Europe.
