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Market News

 January 31, 2012
Traction Evident in Electric Vehicle Sector Despite Energy Blip

 Another company backed by the US government headed to the bankruptcy court last week. Ener1 -- whose subsidiary unit received USD 118m from the US Energy Department to make electric car batteries - filed for Chapter 11 bankruptcy.

Competing battery developers from China and South Korea that benefit from lower costs of labour and raw materials impacted the company, interim chief executive Alex Sorokin said in the petition. Besides, lower-than-expected demand for lithium-ion batteries and the loss of Think Global as a major customer also added to the strains. Ener1's largest unsecured creditors include Liberty Harbor Special Investments of New York and Tokyo's Itochu Corporation.

The company -- which was delisted from the Nasdaq Stock Market in October -- had assets of USD 73.9m and debt of USD 90.5m on 31 December 2011. Bzinfin, a holding and investment company based in Russia, is the largest shareholder, owning about 49% of Ener1's stock.

The bankruptcy is likely to raise more questions about the support extended by the US government to renewable energy companies in loan guarantees and grants as part of the 2009 economic stimulus package. A Congressional committee is already looking into the high-profile bankruptcy of solar panel maker Solyndra, which received USD 535m in loan guarantees. An auction of its assets - piecemeal - is slated for next month. The assets of another government backed company -- Beacon Power -- are set to go under the hammer in February.

There was brighter news however elsewhere in the electric vehicle market. Israel got ready to welcome the first set of electric cars and battery charging stations from partners Renault and Better Place respectively. Similar infrastructure would be available for use in Denmark within weeks and in Australia later this year. The tipping point for electric vehicles could in fact come as early as 2015, Better Place chairman Idan Ofer said in Davos last week. The company expects to go public in the next two years.

China is targeting one million electric cars on the road by 2015. The US is aiming to have a similar number by the same date. The California Air Resources Board adopted new rules last week that would require automakers to sell millions of zero-emission vehicles, setting standards which are typically followed by states from New York to Oregon. Plug-in hybrids and all-electric vehicles have the potential to make up 9% of auto sales in 2020, according to Bloomberg New Energy Finance. That could rise to 22% of sales by 2030, or 4m vehicles.

The uptake of electric vehicles is likely to have positive spin-offs in the broader energy storage market. Most grid-scale lithium-ion battery projects currently cost more than USD 1,000/kWh. Bloomberg New Energy Finance is forecasting significant price drops in the next 36 months to about USD 600/kWh.

Meanwhile, here is what 2012 is looking like for renewable energy. Our estimates show flat-to-down solar installations this year compared to last year's 28GW, which was a huge jump over 2010 installations of 18.2GW. China looks set to be the bright spark this year with installations of much as 5GW predicted by Trina Solar's chief executive Jifan Gao. Suntech Power's chief projected a more modest addition, of 4GW by the nation. Solar installations in 2011 totalled 2.2GW. Bloomberg New Energy Finance has projected solar installations of 3GW this year in China.

The polysilicon price-cycle may be reversing, with the third-consecutive price rise recorded last week. The average spot price of the material increased to USD 28.62 per kilogram, according to our estimates.

In the wind sector, about 46GW could be installed. Last year's installations totalled 43GW, of which 20GW addition was in China alone.

It will also be another strong year for mergers and acquisitions with the drivers being consolidation for the existing players and diversification for the newer ones.

For Bloomberg New Energy Finance chief executive Michael Liebreich's entertaining blog from Davos, please click here.

EU Carbon Closes on 2012 High

European carbon allowances, or EUAs, for December 2012 delivery climbed 12.7% last week to end at EUR 8.19/t, compared with EUR 7.27/t at the previous week's close. The third successive week of advances finished with the highest closing price this year. Cold weather forecasts saw natural gas prices rise, which EUAs sometimes track because higher gas prices may see utilities burn more coal instead and hence increase the demand for emission permits. United Nations Certified Emission Reduction credits, or CERs, for December 2012 rose 5.8% last week to close at EUR 4.03/t, up from EUR 3.81/t at the end of the previous week.

For information on how to subscribe to Bloomberg New Energy Finance's daily news on clean energy and carbon markets, click here.

Tidal Energy for New York's East River

New York City will soon have a pilot tidal energy project in the East River, after Verdant Power was granted the US' first licence for the 1MW project, Bloomberg News reported. The largest deal news of the week was Iberdrola's reported USD 3.4bn bid to raise its stake in Brazil's Neoenergia, according to Bloomberg Businessweek. There were several irrigation funding announcements for Asia: the Deccan Herald said that USD 40m had been earmarked for the Karnataka region of India; the Business Standard reported that USD 45m was allocated to India's Andhra Pradesh region; and the Leyte Samar Daily Express reported that USD 60m will go to the Eastern Visayas region of the Philippines. Meanwhile, a USD 155m water supply scheme got underway in Tamil Nadu, India, according to The Hindu. In the US, the town of Escondido in California will sell USD 76m in bonds for water and sewage infrastructure upgrades, the North County Times reported. Elsewhere, Albania announced tenders for two hydropower plants with a combined 450MW capacity, Xinhua reported.

Temelin Nuclear project Tenders

CEZ will consider bringing in an investment partner to help finance a USD 10bn project to build two new reactors at the Temelin nuclear power plant in the Czech Republic, Bloomberg Businessweek reported. Meanwhile, Westinghouse and Czech engineering firm Metrostav agreed to partner in their bid for the tender to build the Temelin reactors, Dow Jones said. In Germany, Eon agreed a deal with unions to allow the company to lay off 6,000 workers over the next four years, part of its cost-cutting plan to reduce its 80,000 global workforce by up to 11,000, Bloomberg Businessweek reported. France's state-controlled nuclear firm Areva reported that 2011 revenue was down 2.6%, driven by a decrease in its nuclear operations following the Fukushima accident, Dow Jones said. Fukushima itself remained in the headlines, as the Financial Times reported that the Japanese government will inject USD 12.9bn of new capital into Tepco, effectively nationalising it. As the disaster rumbles on, Japan has asked the International Atomic Energy Agency to open an office in Fukushima to continue to monitor efforts to contain the fall-out from the accident, AFP reported.