Tag: Finance

Largest Solar Farm in Virginia Just Commissioned by Amazon Web Services

Back in 2012, Amazon received a failing grade from Greenpeace regarding its use of renewable energy to power its cloud centers. Skip a couple years and in 2014 Amazon Web Services (AWS) announced a goal of achieving 100 percent renewable energy usage for its global infrastructure. An announcement today puts it further down the path toward that goal.

AWS announced that it has teamed with Community Energy to support the construction and operation of an 80-MW solar farm in Accomack County, Virginia, which will be named the Amazon Solar Farm US East. The new solar farm is expected to start generating approximately 170,000 megawatt hours (MWh) of solar power annually as early as October 2016.

Amazon Solar Farm US East will be the largest solar farm in the state of Virginia, with all energy generated delivered into the electrical grids that supply both current and future AWS Cloud datacenters.

As of April 2015, AWS global infrastructure was using approximately 25 percent renewable energy and the company announced an interim goal of increasing that percentage to at least 40 percent by the end of 2016. The Power Purchase Agreement (PPA) for Amazon Solar Farm US East follows a similar PPA for Amazon Wind Farm (Fowler Ridge) in Benton County, Indiana, that was announced in January 2015. Both represent key steps toward meeting these goals.

“We continue to make significant progress towards our long-term commitment to power the global AWS infrastructure with 100 percent renewable energy,” said Jerry Hunter, Vice President of Infrastructure at Amazon Web Services. “Amazon Solar Farm US East – the second PPA that will serve both existing and planned AWS datacenters in the central and eastern US – has the added benefit of working to increase the availability of renewable energy in the Commonwealth of Virginia.”

Virginia Governor Terry McAuliffe commented, “Amazon’s new solar project will create good jobs on the Eastern Shore and generate more clean, renewable energy to fuel the new Virginia economy. I look forward to working with Amazon and Accomack to get this project online as we continue our efforts to make Virginia a global leader in the renewable energy sector.”

A Closer Look at Fossil and Renewable Energy Subsidies

A new study by the International Monetary Fund puts the total cost of fossil fuel subsidies at approximately $10 million a minute globally, when health costs and environmental degradation are included, never mind the effects of a destabilized climate in future centuries.

The most perverse of these subsidies are aimed at finding new reserves of oil, gas and coal, even though it is generally understood that these must be left in the ground if we are to avoid catastrophic irreversible climate change.

When drilling for oil was a start-up industry in the 1890s, it cost today’s equivalent of $500 a barrel to get it out of the ground, according to UC San Diego’s James Hamilton in his study Oil Prices, Exhaustible Resources, and Economic Growth.

The first federal tax break for the oil and gas industry came within its very first years. The Intangible Drilling Costs (IDC) still allows the industry to write off most drilling costs, like the tertiary injectants deduction, in full, immediately, rather than at normal business depreciation rates.

Enacted in 1926, the Percentage Depletion Tax Credit actually increases when prices go up, as it allows companies to deduct a flat percentage of income received from oil or gas wells, frequently resulting in tax deductions in excess of investment.

The Independent Petroleum Association of America describes the tax credit this way: “This deduction is a standard part of the American tax code that supports the development of U.S. oil and natural gas that would otherwise be uneconomic to produce.”

When coal was a start-up industry (in the U.S.) in the late 1700s, it was given tax-free status, smelting was given incentives, and competing old world coal imports were taxed at 10 percent. Four centuries later, coal is still receiving $5 billion in incentives a year. The result is coal-fired electricity at about US $0.04 per kilowatt-hour (when burned in power plants that are already built, the costs of which have already been passed along to ratepayers).

“There are dozens and dozens of tax credits for conventional energy,” said SolarReserve CEO Kevin Smith, based on the knowledge he gained in 30 years of building natural gas plants.  “For example, if the Keystone pipeline goes ahead; the refineries who refine that type of alternative fuel get a 50 percent ITC. There are depreciation allowances for wells as they start to degrade, there are just a long list of tax advantages. And all of them are a permanent part of the tax codes.”

These and other oil and gas subsidies total about $7 billion a year in the U.S., according to Taxpayers for Common Sense Understanding Oil and Gas Tax Subsidies.

For centuries, the U.S. Congress has made these sorts of federal investments in each new form of fossil energy.

Permitting, Leasing Show Inequities, Too

State-level policies increase expenses for renewable energy project developers by making permitting onerous for new projects. In California for example, permitting has historically been almost nonexistent for fossil fuels, but has set a much higher bar for renewable energy.

Permitting solar farms in California can be a three-year multi-million-dollar process. Fossil fuel companies can simply declare on a one page form their intentions to drill next Friday. Further, land leasing costs are higher for solar and wind than for fossil fuels. Land leases for oil and gas were still at 1920s prices in 2009, when the BLM was setting market rates for the renewable industry.

The coal industry pays land rents for natural resource extraction on land that has been undervalued since the 1800s. In the last 30 years, the treasury has lost nearly $30 billion in revenue by undervaluing public lands in Wyoming and Montana where Powder River coal is mined, according to Tom Sanzillo, Finance Director at the Institute for Energy Economics and Financial Analysis (IEEFA).

Make Renewable Subsidies Permanent

It is almost impossible to reverse permanent subsidies in the tax code. It has never happened in the U.S., so some advocates believe that a more practical solution would be: if you can’t beat them, join them.

The coal industry’s PTC for producing refined coal is $6.71 a ton — in 2015. The wind industry’s $0.023 per kWh PTC keeps flickering out every few years. Renewables have been stymied by stop/start subsidies that almost seem designed to scare off investors, because none are permanently in the tax code the way fossil fuel subsidies are.

Uncertainty alone makes subsidies less effective. If the ITC and PTC were permanent, renewable investment would be more predictable, so supplying equipment for projects and capital cost would be less, bringing generation costs down. While some investors are able to stomach the risk of buying into renewables projects without knowing whether the tax credits will still be there when their projects reach fruition, most cannot.

Because subsidies for fossil fuels are permanent, the effect is much greater, because permanence provides a stable and predictable investment environment not given to renewables.

 

One way to create a level playing field with fossil fuels would be make the subsidies for wind and solar just as permanent as those for fossil fuels. Either that, or remove all subsidies for all forms of fuel, something very unlikely to happen.

Reality Check: Maybe Energy Storage Isn’t Ready for Prime Time

Highlighting the growth of the energy storage market at the at the 2015 Energy Storage Association Conference in Dallas, Texas, Oncor’s  VP of Transmission Operations Wes Speed compared the industry to the Texas rain: “A few weeks ago we would look at the skies hoping it would rain. We would occasionally hear rain in the distance, but it would never come. This is like storage. It’s all on the horizon, and if you look at the news now, you can see it’s about to flood.”

Hong Kong Regulator Confirms Thin-film Solar Company Hanergy Is Under Probe

Hong Kong’s markets regulator confirmed it’s investigating Hanergy Thin Film Power Group Ltd., brushing aside a denial from the chairman of the solar company that a probe was underway.

“A formal investigation into the affairs of Hanergy Thin Film Power Group Ltd. has been active and is continuing,” the Securities & Futures Commission said Thursday in a statement.

It’s rare for the SFC to discuss a probe before a formal prosecution is launched. It came hours after Li Hejun, founder and principle shareholder of Hanergy, gave an interview to the Xinhua news agency saying that he wasn’t aware of any probe into the stock and that if there was one he should know.

“It’s unusual because all SFC investigations are supposed to be confidential and everybody under investigation has a secrecy obligation,” said Eric Seto, a partner at Morley, Chow, Seto Solicitors, who works on criminal SFC prosecution cases.

Hanergy is under the spotlight after its shares crashed on May 20, tumbling almost 50 percent in about half an hour before trading was suspended. The company’s market value at one point before the plunge exceeded HK$300 billion ($39 billion) more than the value of household names such as Sony Corp. and Twitter Inc.

 

Unusual Step

 

The SFC has broken its silence on at least one other occasion, in March 2009 when it announced an ongoing investigation into the trading of HSBC Holdings PLC shares.

Li has drawn criticism for skipping Hanergy’s annual general meeting in Hong Kong on the day of the crash in favor of delivering a speech at the opening of a solar exhibition center in Beijing.

Even before Hanergy Thin Film’s shares plunged, the solar manufacturer’s business model was under scrutiny. Hanergy makes thin-film solar panels using equipment from Hanergy Thin Film. In January, the Financial Times newspaper questioned why the bulk of Hanergy Thin Film’s sales were to the Beijing-based parent, Hanergy Holding Group Ltd.

Trading patterns in Hanergy’s shares, the company’s production levels, borrowings and relationships with lenders have also been questioned.

 

Trading Suspended

 

Hanergy’s shares are currently halted in Hong Kong, and Hanergy Thin Film has yet to officially address the decline.

Even with Hanergy’s decline, the company is still valued at HK$163 billion, more than four times bigger than First Solar Inc., the biggest U.S. solar company using thin-film technology. First Solar and Japan’s Solar Frontier K.K. dominate the market for thin-film solar cells.

In an interview in March, Li called the company’s investments cautious and said the run-up in the stock was validation of the solar-maker’s focus on a new era of mobile energy.

“All of our plants, if reporters can go and see, are putting on extra shifts and are in full production,” Li said in the Xinhua interview. “We’re in big production. It’s very, very, very good. Hanergy is in its best shape since it started.”

Smart Investments: Ditch Your CD for Renewable Energy Yieldco Dividends

Renewable energy yieldcos have gain traction in the past few years, and are certainly making it easier to develop projects. But many don’t realize that yieldcos also offer solid financial benefits for the average person whose only brush with investment might be a few bucks in a CD. It is clear that investors can earn at least 10 times more in dividends by buying shares in a renewable energy yieldco than the interest earned by putting money in a CD. Yieldcos require the same degree of simplicity — and a very steady income stream.

Powering African Mines: What Role Will Renewables Play in Addressing Mining’s Current Power Crisis?

Anglo American Platinum is stepping up its investigation of renewables now that South Africa’s main energy utility, Eskom, is experiencing energy shortfalls. “This is a very big challenge for us,” says Gerhard van den Berg, the company’s principal engineer, energy. “With Eskom having shortages and not being able to supply, we’ve run into what they call stage-two load curtailment.”

Renewable Energy Is Beginning To Power Africa

According to the International Energy Agency, sub-Saharan Africa will require more than $300 billion in investment to achieve universal electricity access by 2030.

Committing more than $7 billion in U.S. government support and attracting nearly three-times that in private sector funding, Power Africa, which launched in October 2013, marks a milestone for President Obama with regard to action on climate change and clean energy, not to mention foreign relations and international development. The initiative gives the U.S. a leadership role in addressing a range of critical regional and global issues – eradicating poverty, improving health and gender equality, opening up economic opportunity and conserving ecosystems and natural resources as well as promoting clean, renewable energy. In this regard the program dovetails nicely with the U.N.’s expiring Millennium Development Goals (MDGs) and its new strategic Sustainable Development Goals (SDGs), as well as Secretary General Ban Ki-moon’s Sustainable Energy for All initiative. 

Who Is Weathering the $50 Oil Storm in Biofuels, and How?

A period of lower-cost oil has, famously, descended on the market, reminding us that business models should always take into account “black swan” economic events such as the battle between OPEC and unconventional oil producers over some 10 percent of global market share, which has tumbled oil prices some 20 percent down, with US currency strength causing another 20 percent or so tumble.

First Anniversary of The Balkan Floods Highlights Renewable Energy Market Opportunities

One year ago this month, severe flooding in Serbia, Bosnia-Herzegovina and Croatia killed 79 people, displaced about half a million and caused economic paralysis of the region. In the wake of these the catastrophic events, a renewed focus has emerged on how to repair infrastructure sustainably and harmonize the region’s energy sector with the environment.

The Balkan Region has enormous renewable energy potential but to date progress has been hindered by financing, weak legislation and poor grid infrastructure.

Clean Energy ETFs Are on a Tear

Green investing used to be synonymous with losing money. But while the S&P 500 Index is up 2 percent this year, and the MSCI All-Country World Index is up 5 percent, clean energy ETFs have double-digit returns. The Market Vectors Glo…

Solar Market Suffering in Brazil

The Brazilian real has declined 17 percent since Oct. 31, when more than a gigawatt of solar farms won contracts in the country’s first-ever national solar auction and with the slumping currency driving up import prices, developers are holding off on signing supply deals for PV panels. Manufacturers that were considering setting up shop in Brazil are having second thoughts. All of that is threatening President Dilma Rousseff’s goal of increasing the use of solar power more than 100-fold and creating a domestic solar industry.