Energy
February 7, 2011
The European Solar Companies have found things going tough in 2009 as the solar market changed radically with the Lehman crisis.As the prices of the raw material Polysilicon crashed and Chinese competition increased,these companies started bleeding red ink in a prodigious manner.The high cost structure of these companies with factories in Europe stood naked against the competition.With high debt loads,there was a high change that these companies would go bankrupt.Most of them like Q-Cells,REC started to move manufacturing to Asia while Solarworld moved to Europe.Other smaller companies muddled through.However a spectacular 2010 growth in world solar demand has brought new life into these companies.With capacity constrained,even their higher prices could be absorbed by solar installers.These companies have reported much better 2010 results with Solarworld and REC leading the way.
February 7, 2011
Italian Electricity Regulator really shook the global solar market saying that approximately 6 GW of Solar Installations were done in the country in 2010 up almost 500% from 2010.While 2 GW were installed and connected in 2010,4 GW worth of application were submitted by 50,000 installations which were installed but not connected.This means that that Italy's target of 8 GW in 2020 was almost fully met in 2010 itself.I had written that Italian Solar Feed in Tariff Subsidy Cuts for 2011 will fail to stop the Boom in Solar Demand and the 2020 target would be met much earlier.But 2010 was not in my wildest projection.The combination of high sunlight,high electricity rates,falling solar module prices and attractive feed in tariff by the government has made investing in solar in Italy a hugely profitable venture.So 6 GW is not totally impossible given the massive supply growth seen in solar panels.Every solar company in the world had been shipping to capacity making it a mystery as to what was the source of such demand.Italy might prove to be the answer.
February 7, 2011
The Chinese Penetrate the US Solar Utility Market – exclusive playground of First Solar and Sunpower
The US Solar Utility Market has been the preserve of the 2 largest US Solar Module Players Sunpower and First Solar.While other Solar Panel Makers have won small deals,these 2 companies have dominated the US Utility Market so far.Sunpower has been very successful in the commercial,municipal and utility segments winning a huge number of deals even as its residential dominance evaporated.The bigger Chinese solar producers like Trina,Yingli,Suntech had already taken over the residential market in California with their much cheaper prices.Now even the larger utility market is under threat from the low cost companies from Asia.Note upstream producers like LDK and GCL Poly are also targeting the system development market in US through acquisitions and alliances.The 250 MW Sempra Generation solar plant being built in Arizona will source Suntech modules and will be completed by 2013.This is a huge order win by Suntech which is the largest module producer in 2010 and could see other Chinese producers using this as a template to push out Sunpower and First Solar.
January 25, 2011
United Kingdom is one the worst countries in the world in terms of its commitment towards Global Warming.Like Canada and USA,UK has been a notable laggard in the Green Energy area.It has one of the smallest percentages of its Energy being derived from clean sources.The government has not changed its policies too much as well despite its "green posturing".Solar FIT cuts which started in April 2010 were put under review by the authorities in as little as 6 months .This was despite only 10 MW of solar installation a month compared to the 500 MW average for Germany.In offshore wind power,UK is regarded as the leader with the largest installed capacity.However the growth in even Wind Energy has been slow and halting.Also offshore wind power is not the most mature of green technologies out there,so don't expect any miracles in Renewable Energy growth through this source.
January 25, 2011
The Spanish Government faces multiple lawsuits over its Royal Decrees which cut the Feed in Tariff for Solar PV Installations Retroactively.These laws were passed in Dec 2010 as part of the comprehensive review of the Renewable Energy Subsidies by the government.While Wind Energy and Solar Thermal Subsidies were changed earlier,the controversy over the Solar PV subsidies had forced the government to delay the change to the last minute.These changes were strongly opposed by the Solar PV Industry Association ASIF which has earlier called the measure as "industry killing".These cuts over the next 3 years would be done through a "backdoor approach" in which the subsidies would be restricted for a only a few hours for the Solar PV plants.
January 13, 2011
The Indian Solar Energy Policy JNNSM has been beset with more than its fair share of problems even before completing its first phase.Despite amibtious plans to set up 20 GW of Solar Energy Capacity by 2022,the Policy Support and Subsidy has come under fire from all directions.The First Phase of JNNSM has auctioned 150 MW of Solar PV Capacity to 30 Developers in blocs of 5 MW each.This led to irrational bidding by mostly unknown and bit players which has led many to question to the ultimate viability of these projects.Note the Solar Thermal Bidding has been equally as disastrous with bidding leading to very low tariffs for the winning developers.
January 13, 2011
USA recently signed a Military Law which obliges the US Defense Forces to buy Solar Panels which are made in the USA.This "Buy American" proposal directly contradicts US actions and policy which advocates free trade in Green Energy.The US Steelworkers Trade Union recently filed a petition with the US Administration against subsidies being given to the Green Industry by China.US government officials also spoke against the "domestic content" requirements of the Indian Solar Subsidy Policy JNNSM.However when it comes to their own solar panel procurement,the US government has foolishly forced its military forces to buy USA made panels.Not that this will help in boosting the US industry too much,as a number of foreign solar panel producers like Solarworld,Suntech already have module making factories in the United States.Also it remains doubtful about how many solar panels the US Military will buy in the coming years.It will remain a fraction of the global solar demand.Instead of supporting US Solar companies like Evergreen Solar,Energy Conversion Devices which are fighting to survive,the administration has given billion dollar loans to a Spanish Solar Thermal Producer.
January 12, 2011
Sunpower has been the dog of the solar market in 2010 as competitive pressures from low cost Chinese companies have made investors question the long term sustainability of the company.But Sunpower has managed to survive with some smart deals like the manufacturing JV with AUO and focusing on the solar project development.Sunpower makes the world's most efficient solar crystalline panels but comes at a much higher cost.This has led to erosion of its marketshare as cutthroat Asian companies have ruthlessly cuts prices and costs of solar panels.Sunpower has lost its dominant position in the US residential market with major Chinese companies like Trina,Suntech,Yingli and Canadian Solar winning large chunks.However Sunpower management has been a trier all along with its management constantly looking for ways to survive and proper .It has also started using less efficient solar panels for its projects as part of its strategy to compete.
January 12, 2011
Asset Financing for utility grade projects accounted for $128 billion while a substantial amount was also raised for Green IPOs notably Enel Green Power,Goldwind,Datang,Longyuan etc.The figure does not include M&A figures not that there were any big bang acquisitions though a number of M&A activities took place in the Smart Grid space.Government individually ramped up the subsidies for Green Industries despite a failure to arrive at a meaningful global agreement to reduce carbon emissions in the Copenhagen Meet.Most of the investments tool place as countries increasingly jockey for the top spot in the emerging Green Industry.Conglomerates like Samsung,GE,Mitsubishi,Siemens have made Green Industry the focus of their management focus and investment leading to the astounding 39% growth.Note Green Advocates have said that $500 billion in annual investments will be required by 2020 to restrict carbon emissions to a tolerable level.
January 12, 2011
China using its massive foreign exchange horde to buy commodity assets around the world is an old story by now.It is now also getting into the act in the Green Energy area as China's state owned chemical group Blue Star has bought Norwegian environment chemical company Elkem from the Orkla conglomerate.Elkem is one of the largest silicon metal producers in the world and makes a solar grade polysilicon through a specialized low cost process.Orkla which is also the 40% owner of one of the world's largest silane and polysilicon producers Renewable Energy Corporation (REC) had been looking out for some time to sell Elkem.China has not been a big producer of polysilicon which is the main raw material for producing silicon based semiconductors and silcion based solar panels.The massive demand for polycrstalline modules has resulted in it being the main demand driver for polysilicon.
January 12, 2011
About 800 jobs in the Solar Industry will be lost directly to China as the USA administration has failed to support its established solar companies.Massachusetts had supported Evergreen with $58 million in subsidies but it was not enough for Evergreen to compete against the ongoing subsidies received by the strong Chinese players who have captured almost 70% of the global market in a few short years.The other US solar companies like Sunpower and First Solar are surviving by manufacturing most of their solar panels in Malaysia and other places.The recent "Buy American" Pentagon Law may not help all that much as module making is a low value add activity already being done by European and Chinese players in the USA.In the complicated supply chain of global manufacturing its difficult to understand who ultimately benefits and loses from such provisions.Note most of the polysilicon going inside the wafers and cells made in Asia are imported from USA and Europe.
December 21, 2010
France recently halted its solar subsidy program for 3 months for solar installations under 3 kw as it was deluged with a large number of applications.Solar Feed in Tariffs are quite generous for certain type of solar panel installations like BIPV and greenhouses.This combined with rapidly falling solar panel prices primarly due to low cost Chinese manufacturing has made the business extremely lucrative.Note France is not the first country to see a massive flood of solar applications.Spain,Czech,Germany,Australia have faced problems with solar feed in tariff programs mainly because of poor design by slow moving bureaucrats.However most of these countries have never blamed cheap Chinese panel imports for their badly designed programs.Germany which is the undisputed solar market leader did for a while raise the Chinese bogey but it was for a short while.Anyone with a little understanding of the solar industry would know that almost 50% of the value is created in installation which is all done locally.Also most of the polysilicon raw material is made in the West as also most of the equipment used in producing panels in China.
December 21, 2010
Dongfang Electric Corporation,China's largest power equipment producer has bagged major contracts in India.Dongfang Electric is the 3rd biggest Wind Turbine Producer in China as well and has managed to bag a 276 MW $203 billion WTG supply contract with Abhijeet Group .This is the first major contract wind in the Wind Equipment Sector for a Chinese company and could be start of a major trend.Dongfang has also won a small a massive $2.5 billion contract to supply 6. GW of super critical coal equipment to KSK Energy. Note Chinese companies have become the low cost leaders in the Wind Equipment Industry and sell much below Western competitors.At almost $700,000/MW,the Turbine order is a steal for the Abhijeet Group and cannot be matched by Indian or Western players.Leading WTG companies from the West like Vestas and Gamesa are reeling from Chinese competition and slowdown in Western markets.Suzlon too has been affected as Korean shipbuilders and Chinese wind producers have become major players.Using domestic content requirements and technology transfer,Chinese companies have become top global producers from zero presence just 5 years ago.
December 15, 2010
Germany is almost certain to cut the solar feed in tariff in 2011 on top of the regular 13% decrease.Note Germany is the largest solar market in the world by far and installed an astounding 8 GW of solar panels in 2010.With almost 18 GW of total solar installations,the German solar energy capacity is almost half of the world's capacity despite bad conditions for solar energy.Germany had set a target of around 4-5 GW of solar energy this year in the upper case and this has been vastly exceeded as solar module price cuts have made it attractive to install solar panels.
December 15, 2010
USA has opposed India’s Local Content Requirements for the Federal Solar Energy JNNSM program.Note according to the JNNSM rules,solar panels will have to be produced in […]
December 14, 2010
Posco,one of world's largest steel producers has been trying to enter the solar market like its other Korean brethren.Note South Korea has been really pushing the Green Industry in the country giving all sorts of incentives to Wind Energy,Electric Vehicles,Solar Energy etc.Korean conglomerates have responded by making huge investments into all sorts of Green Sectors.LG and Samsung have already established crystalline solar cells lines alongwith Hyundai.Hanwha has made a big bang acquisition of the 4th largest Chinese module producer Solarfun while OCI Polysilicon is on its way to become the 2nd largest producer of polysilicon in the world.Posco made its intention known about entering the solar market when it made a play for the Norwegian poly producer Elkem.This was a surprising decision considering that Posco's core strenght of steel making has little to do with production of polysilicon.
December 14, 2010
Using the same logic,I had questioned the massive amount of USA taxpayer money being given as a cash grant to build almost 4-5 GW of Solar Thermal Plants in California.Most of these solar thermal projects were approved in the last 6 months of 2010 so that they could be eligible for the Treasury Cash Grant under Rule 1603.I seem to have been vindicated quite early with 2 of these giant solar thermal projects being developed by Tessera Solar have run into trouble.The CEO of the company has already left and many of the employees have been fired.Strange for a company that has won multi billion projects in hand.The parent Irish company NTR is reportedly looking to shelve the plants as it does not have enough money for 5% of the total project costs required before 2010 end.
December 14, 2010
Taiwan which had set a cap restricted solar feed in tariff program in 2009 is set to change the subsidies to reflect the decreasing costs of solar energy.Note Taiwan is one of the biggest solar cell producers in the world,next only to China.A number of its world class companies like TSMC and AUO have made major investments into solar energy recently.It already has big pureplay solar cells companies with Gintech and Motech amongst the top 10 world solar cell producing companies.A big domestic market is a good testing ground for new companies and technologies.Taiwan is now set to change renewable energy subsidies for wind and solar energy.Solar Energy subsidy for 2011 will be lowered while for wind energy it will be increased.Renewable Energy in Taiwan - Feed in Tariffs Wind to be strangely Increased while for Solar Sensibly Decreased
December 14, 2010
Asian Development Bank (ADB) may rescue the JNNSM process which seems to be headed for certain problems.The Bank is committing to provide loan guarantees for under 30 MW projects to Indian Banks and upto 25% equity investment into >30 MW projects.Note debt financing is a major issue which was talked about by the biggest Indian utilities for not participating.Note ADB has already committed to setting up 500 MW Renewable Energy Capacity in India in JV with NTPC.This will further increase ADB's exposure to Solar Energy in India.It remains to be seen if ADB give equity and debt to many of these projects which don't seem to be feasible at these prices.Will ADB willing to take losses in these ventures and provide loans to many of these unknown firms with no track record.
December 13, 2010
Note both the Solar Thermal and Solar PV Project bidding have led to grave doubts about how these solar plants will be implemented.Not only are the firms small,unknown with little project experience but they have also bid for feed in tariffs which would definitely lead to losses.According to MNRE,the government also plans to make the local domestic content requirements more stringent.The requirements will be extended to solar inverters as well and the provisions may not stop at 2013 but will go beyond as well.Note the JNNSM mandates that modules for solar energy be made in India in the first year and both cells and panels be made in the 2nd year.This is important for the growth of solar energy equipment manufacturing in India.This has been successfully used by both China and Canada to foster the growth of the green industry in their domestic market.However it has the side effect of raising prices and increasing inefficiency as they would lead to higher costs.They could also lead to the gaming of the system particularly as India is highly corruption prone country.
December 13, 2010
Another Japanese Giant Mitsui gets into Solar Energy through Tunisian Hybrid Gas Solar Thermal Plant
A Number of Japanese Companies have been entering the Solar Energy Market following in the footsteps of Japanese solar leaders like Sharp,Kyocera,Mitsubishi and others.Toshiba was a surprising entrant into the Solar EPC market with a solar plant planned in Easter Europe.Now Mitsui Engineering and Shipping,one of Japan's huge zaibatsus is planning a foray into the solar energy market as well.The Company is being supported in its initiative by METI which will collaborate with the Tunisian government in setting up a combined gas solar hybrid plant.A 5 MW Solar CSP plant will be set up by 2013 to demonstrate the technology.
December 13, 2010
Utilities trying to spinoff their Renewable Energy Subsidiaries have faced a very tough 2011 with many of the plans being scrapped.The Utilities which have managed to list have done so at much reduced valuations and have seen their stock prices erode after listing.Enel Green Power which was the biggest Green Utility to IPO in 2010 managed to to so after massive delays and lowering its stock price 2 times.Orient Green Power in Indian and First Wind Holdings of USA which were pureplay Green Utilities also saw very tough times with First Wind being forced to scrap its capital raising plans.China's Datang and Huaneng Group which were planning to list their Green Subsidiaries in Hong Kong for a long time faced a big question as well.Both these large state owned utilities have huge wind power assets which are forecast to grow at a tremendous rate over the next decade.The prospects are good for both these green utilities as wind turbine prices have been falling as a result of sharp competition amongst WTG companies in China such as Ming Yang Power.
December 9, 2010
Solar Energy in India at the Federal Level is facing massive problems but the state level initiatives are pushing ahead.Gujarat has been at the forefront of promoting Solar Energy recently setting aside a 3000 acre site for 500 MW of Solar Power Generation.First Solar,the Cd-Te Leader and Producer of the largest number of Panels in 2009, has got an order from Acme Telepower for 15 MW Plant to be constructed in March 2011.Note First Solar is the also the lowest cost producer of solar panels in the world currently and looks to be so in the foreseen future as well.First Solar is expanding capacity by almost 50% in 2011 after a slow 2010 and looks upon India as one of its most important markets.
December 8, 2010
The biggest problem is that the winners of the Solar PV Projects are mostly unknown small firms who have bid so low that make the returns negative for investors according to the renewable energy ministry officials (MNRE).Bidding has gone as low as 23c/Kwh which is crazily low considering the debt costs in India are as high as 13% annually.Compare that to China where debt is priced as low as 3-4% and the winners are huge utilities.With even India's Tata Power saying that the projects are not bankable as their is confusion how the electricity tariffs will go to developers,its difficult how these unknown firms could manage the financing .While the companies will lose their bid deposits if they don't finish the projects,Indian Solar Energy will be the biggest loser as the failure of the Phase 1 of JNNSM of 1000 MW by 2013 will lead to even further delays.Already JNNSM has been criticized by a parliamentary panel for the tardy progress.Note some states have taken the lead in pushing solar energy on their own,namely Gujarat which aims to put up more than 500 MW in the next year or two.
December 8, 2010
NextEra Energy Resources which was previously known as FPL Energy has bought a number of Solar Energy Generating Assets in the past few months.NextEra is the largest Renewable Energy utility in the USA with around 18 GW of Capacity out of which around 6.5 GW is Gas and 7.5 GW of Wind Powered Capacity plus 2.5 GW of Nuclear Energy.NextEra Energy with its long experience in Green Energy Generation has now decided to expand its Solar Asset Portfolio buying equity stakes in Solar Thermal as well as Solar PV Farms in USA and Canada.NextEra Energy is already the biggest Wind Energy Producer in the United States and on the way to become the biggest Solar Energy Producer as well.While Wind Energy is facing uncertain times in the USA,Solar Energy is growing at a rapid clip driven by the sharp fall in Solar Panel Costs which have more than halved in the last 2 years.
December 7, 2010
Russia huge huge wind and solar energy resources with gigawatts of potential.It also has great geothermal energy resources as well however most of them are not developed at all.There is no significant support for Renewable Energy Resource as well with Green Energy capacity in low double digits (15 MW of Wind in 2006).With Putin calling Wind Turbine hazardous to birds and causing Environmental Problems,It looks like Russian Leadership will not change its Fossil Fuel Centric Policy any time soon.While Middle East Countries are dead against Climate Change efforts,they are developing Nuclear Energy and some Renewable Energy for exporting more Energy.However Russia does not even want to do that despite being a leader in Nuclear Energy.
December 7, 2010
A2Z Maintenance and Engineering Services is a Private Equity Promoted Facilities Management,Waste Management and EPC Company which is getting into the business of biomass energy.Company has fixed a price band at Rs 400-410 comprising of fresh issue of Rs 675 crore (~$150million) by the company and an offer for sale of upto 4.5 million shares by the selling shareholders.Note Renewable Energy in India has a bright future with around 5 GW of Renewable Energy Capacity to be installed per year over the next decade.However Biomass Energy may not be the best area considering the considerable expense and uncertainty in acquisition of feedstock.The Company already operates in 3 distinct sectors namely
Summary
A2Z is very similar in nature and valuation to VA Tech Wabag which did a successful IPO recently.The margin profile,growth and management is very similar.As such A2Z is a decent company however its not a compelling buy given the valuation.Note Biomass Energy is a tough sector to operate in and Orient Green Power has done badly since its IPO without having done anything badly as such.A2Z given the overall qualitative and quantitative factors seems a good stock at fair valuation.This makes the company a decent one to buy.
December 6, 2010
Gujarat has been the biggest promoter of Solar Energy in India amongst all the other states.The State has already implemented a clear and forward looking Renewable Energy Policy with emphasis on Solar Energy.It has signed PPAs with a number of solar project developers under its State Solar Subsidy Scheme.While other states are looking mainly towards the federal subsidy scheme JNNSM to push Solar Energy Generation,Gujarat is looking to push Solar Energy on its own.Gujarat now has reportedly acquired 3000 acres at Charnaka village in Patan District which it will give to solar project developers to install solar panels.
December 4, 2010
The Trend of State Government Individual Companies Partnering in Renewable Energy Manufacturing to generate Green Jobs is increasing in the last year.Individual provincial governments in Canada,China and South Korea have recently signed deals with major Renewable Energy Companies to set up Manufacturing Plants in their respective provinces.The government gives various incentives such as land,tax breaks,assured markets,cheap loans in return for huge green investments from the companies.This gives a strong boost to the provinces which are fighting it out with other provinces for Green Dollars.While the process may not be exactly democratic and lead to an ideal selection,it does lead to faster implementation and guaranteed jobs in an increasingly tepid global economy.The latest province to join the bandwagon in a major way is Hebei province in China which has tied up with Chinese Wind Turbine Producer Ming Yang Power.Note other Chinese provinces have also tied up with Chinese Renewable Companies to increase Alternative Energy Investments in their regions.
December 4, 2010
France has halted its solar feed in tariff bubble putting a moratorium on new applications for installing solar panels above for 3 kw installations.This has been done after applications for solar panels exceeded the 500 MW per year target set up by the French ministry.The Prime Minister called the solar feed in tariff subsidies reaching a “veritable speculative bubble”.France has already changed its solar feed in tariffs 2-3 times in 2010 as it tries to fine tune the subsidies so that renewable energy investors earn a decent return.However the fast decrease in solar panel prices has caught the bureaucrats off-guard which is not surprising.Feed in Tariffs in general have been badly designed by most public authorities around the world leading to huge bubbles.Czech has suffered from the biggest solar subsidy bubble on which it recently cracked down through taxes,50% cut in tariffs and other measures as electricity rates increased sharply as subsidies ballooned.Spain and Italy have found their Feed in Tariffs leading to runaway subsidies while Germany which has the most successful FIT program too had to cut FIT by a single ad hoc measure in order to prevent a bubble.