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Market News

 February 14, 2012
Pendulum in Solar Swings from Europe Towards New Markets

 First of all, tickets for the Bloomberg New Energy Finance Summit in New York on 19-21 March are selling fast, with just over a month to go before the leading thought-leadership event in the sector. To make sure you get a ticket, please click on www.bnefsummit.com.

In the clean energy sector last week, a shift in the world balance of power in solar was evident in two separate developments, in Saudi Arabia and South Africa.

First, Centrotherm Photovoltaics announced that it has won a contract from Idea International Investment to help develop a USD 1.1bn polysilicon project in Saudi. The German company will provide the technical knowhow and basic engineering for the facility which will have a capacity to make 10,000 tonnes of the material. Production is to start by mid-2013. Idea may later expand upstream and make ingots, wafers and modules, it said on its website.

The market for polysilion is currently oversupplied. Spot prices fell by about 60% last year. The average spot price in the first week of February was at USD 28.79 per kilogram, down from USD 28.96 in the preceding week, according to Bloomberg New Energy Finance. The capacity of just the top 10 global manufacturers at the end of 2011 is expected to be enough to meet demand in 2012. Significant capacity expansions have already been announced by China's GCL-Poly and Korean OCI, among others. Idea's project is early-stage, and may face big challenges ahead.

In South Africa, Soitec - a manufacturer of semiconductors and solar products - announced that it has obtained funding from Investec for a 50MW plant using concentrated photovoltaic technology, to be built in Touwsrivier in the Western Cape region. These systems use lenses and mirrors to focus sunlight on solar panels and thus multiply the power generated. That this unusual technology can get financing in an emerging market is a very positive signal.

Staying on solar, the biggest maker of thin-film panels - First Solar - plans to cut output at its factory in Germany as declining subsidies reduce European demand. Most of the prominent European countries are reviewing their incentives for clean energy. Germany is mulling a move to monthly adjustments of feed-in-tariffs while the UK is planning to cut preferential tariffs every six months to reflect the declining costs and to limit its tariff subsidy burden.

The wind sector also continued to show signs of strain, with Vestas - the world's biggest turbine maker - reporting a EUR 166m loss for 2011. This was four times bigger than that forecast by analysts, and sales were below the guidance given by the company in January. Though analysts are predicting a bleak 2012 for the company, chief executive Ditlev Engel said he expects it to be a "very very busy year", with a 40% higher activity level than 2011. Vestas has projected revenues of EUR 6.5bn to EUR 8bn in 2012 and shipments of about 7GW compared to 5GW in 2011.

Suzlon - India's biggest maker of wind turbines - also reported a wider-than-estimated loss in its third quarter (October-December), as interest costs and provision for taxes increased.

The tussle between China and the US continued with the International Trade Commission saying last week that cheaper imports from China and Vietnam were harming makers of wind towers in the US. The preliminary ruling was in response to a petition from the Wind Tower Trade Coalition asking the Obama administration to impose anti-dumping and countervailing duties. A full-investigation will now follow.

In 2010, the US imported towers valued at USD 103.6m from China and USD 51.9m from Vietnam, according to Commerce department. The US price on imported towers was 64% less than the domestic price in China while the gap was 59% in the case of Vietnam, according to the petition.

In the biofuels sector, Bloomberg New Energy Finance predicts that jet fuel made from non-food vegetable oils like jatropha may be the first to become competitive with aviation fuel. This could happen as early as 2018, if the cost of carbon is added to jet fuel.

EU CO2 Down as Gas Supply & Weather Unfreeze

European carbon allowances, or EUAs, for December 2012 delivery fell 6.8% last week to close at EUR 7.92/t, compared with EUR 8.50/t at the end of the previous week. After hitting a weekly high of EUR 8.85/t on Wednesday morning, EUAs tumbled with gas prices on news that Gazprom would seek to meet a 10% shortfall in gas flows from Russia to Italy by the end of the week. Weather forecasts also indicated that temperatures would rise above freezing sooner than expected, reducing demand for natural gas. EUAs sometimes track high gas prices because utilities may burn more coal instead, which requires twice the number of emissions permits. Also on Wednesday it was revealed that BusinessEurope, a lobby group, sent a letter to members of the European Parliament urging them not to withhold EUAs from the market to boost prices, which may have generated bearish sentiment. United Nations Certified Emission Reduction credits, or CERs, for December 2012 lost 6.1% last week to close at EUR 3.83/t, down from EUR 4.08/t at the end of the previous week.

EON Sets Sights on French Hydropower Concessions

Germany's Eon, which aims to spend EUR 7bn over the next five years to expand its renewables business, announced a partnership with Hydrocop Concessions, a power distributor in eight French regions, to bid for tenders to operate hydro power plants in France, Bloomberg News reported. Meanwhile, France's Alstom announced more hydro contracts: EUR 18m with its partner Hydrochina Huadong to provide equipment for the Song Bung 4 project in Vietnam; and EUR 30m to build a substation for the Nurek hydro power project in Tajikistan, financed by the Asian Development Bank. In the US, the National Hydropower Association joined the wind, solar, biomass and geothermal industries in saying jobs will be lost if Congress does not extend the Production Tax Credit, due to expire at the end of next year, according to Bloomberg News. The US Department of the Interior announced USD 50m for six water infrastructure projects in the West, it said in a press release. In the Middle East, Lebanon agreed a USD 200m loan with the World Bank for a project to divert water to Beirut from a river in the south of the country, the National News Agency reported.

US Approves First New Nuclear Reactors in Over 30 Years

The US Nuclear Regulatory Commission approved Southern Co's application to build two new nuclear reactors at the Vogtle plant in Georgia, the country's first in more than 30 years, despite chairman Gregory Jaczko's dissenting vote, the Financial Times reported. Canada reached an agreement with China over uranium exports that could be worth as much as USD 3bn, the International Business Times said. In Europe, President Nicolas Sarkozy refused to shut down the Fassenheim nuclear plant, France's oldest, and will instead extend the lifetimes of the country's aging reactors beyond 40 years, Bloomberg News reported. Areva and EDF agreed on a long-term uranium supply deal this week, the companies announced in a statement, which may see EDF help finance a new mining project. The two companies also agreed to work with China Guangdong to develop a 1GW nuclear reactor, which Areva hopes will be based on the Atmea model it developed with Mitsubishi and is bidding to sell to Jordan in a USD 4.5bn contract, Bloomberg News reported. Nearby, Belgium's Walloon region is considering introducing a nuclear tax, l'Echo said. Czech industry and trade minister Martin Kuba has abandoned his predecessor's plans for a new generation of nuclear power plants and will instead focus on 'realistic' existing plans to expand the Temelin plant, Hospodarske Noviny reported.