50 GW of global wind installed in 2014, up by 40%

Data from the World Wind Energy Association (WWEA)

370 GW of globally installed wind capacity = 5% of world's electricity demand

50 GW installed in 2014

45 GW installed in 2014 in 12 leading countries for wind development
23 GW installed in 2014 in China - #1 wind power country
06 GW installed in 2014 in Germany
05 GW installed in 2014 in the US
03 GW installed in 2014 Brazil

Other notable wind countries and capacity by 2014-end: Spain (22.9 GW), India (22.4 GW), UK (11.9 GW), Canada (9.6 GW), France (9.2 GW), Italy (8.6 GW), Sweden (5.4 GW), and Denmark (4.8 GW).

US House approves PTC renewal

The US House of Representatives voted on 03 December 2014 in favour of a bill that will extend dozens of expired tax breaks through to the end of 2014, including those that support renewable energy sources, such as the Production Tax Credit (PTC).

• The Production Tax Credit (PTC) pays 2.3 cents/kWh during the first 10 years of wind farm operation. 
• The Investment Tax Credit (ITC) - another tax break to support renewable energy - is worth up to 30% of the costs of developing and building wind projects.

The bill, the Tax Increase Prevention Act of 2014 (H.R. 5771), will extend by one year certain tax credits that expired on 31 December 2013.

Long-term phaseout of the PTC was not supported
The bill was presented on Monday following last week’s collapse of bipartisan negotiations around a package that would have included a longer-term phaseout of the PTC, which primarily benefits the wind industry. The phaseout was originally proposed as a way to wean wind producers off the tax credit.

Eligible projects
The tax breaks adopted on Wednesday include credits to support projects in renewable energy, biofuels and energy efficiency. They are on offer to projects under construction before the credit expires (31.12.2014) or where companies have made a minimum “safe harbor” investment to secure eligibility, meaning some new projects could qualify.

Industry views
Political action group, Governors’ Wind Energy Coalition, stated on Tuesday that wind industry lobbyists believe the extension does not go far enough for companies in the wind industry, as it often takes longer than one year to get projects in the ground.
When the PTC expired in 2013, new wind installations came to a halt, resulting in a 92% drop in new wind projects compared to 2012, a $23bn drop in private investment and nearly 30,000 American jobs were lost, according to the American Wind Energy Association.

Source:Clean Energy Pipeline and ReNews

Onshore wind is the cheapest source of electric power in Europe, said EDP

Onshore wind has become the cheapest form of energy in Europe according to Portuguese utility EDP's Investor Day 2014 presentation in London on 14 May 2014.



The levelised cost of energy (LCOE) of onshore wind power in Europe in 2012 was 68 euros per MWh, 20% cheaper than natural gas and nuclear, and one third cheaper than coal. By comparison, offshore wind is almost three times more expensive.

Neto told the analysts that wind energy is also cheaper than gas in key emerging markets such as Brazil, South Africa, Mexico, and major Asian markets.

Source: http://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=889-1181-14392&target=en-default-&status=ondemand&browser=ns-0-0-0-13-0&stream=flash-video-500

Why use a yield co to raise capital for solar projects?

This blog post extracts some interesting parts related to the benefits and challenges of using a yield co to raise capital for solar projects based on an article titled "New Horizons In Solar Financing" published on Law360 on 15 May 2014 by Freedman and McFayden - partners at Shearman and Sterling LLP. They noted that alongside public debt markets and crowdfunding, yield co can be helpful in financing solar projects.

What is a yield co?

Historically, developers raised equity at a parent level, requiring investors to optimally value an entire pipeline of projects in various stages of development and even (in some cases) non-development businesses. Recently, developers have shown growing interest in an alternative.

A yield co is a special purpose vehicle created to hold a portfolio of de-risked operating assets and monetize a portion of its value through the sale of equity on a public exchange.

The yield co distributes some or all of the projects’ revenues as dividends. The parent company may use the cash raised from the initial sale of shares and from ongoing dividends to develop additional assets to sell to the yield co or for general corporate purposes.

Any cash retained by the yield co may be used for operations and maintenance and to acquire additional projects.

Projects may be acquired from the parent or an affiliate, which may also be involved in managing the company, or from third parties.

The company may be established around a portfolio of identified projects, or it may be established as a blind pool of capital, with management exercising discretion to acquire projects opportunistically.

Benefits

First, in a yield co, the tax attributes of renewable generation can offset the tax obligations of other projects in the portfolio. In order for the yield co to utilize all of its tax benefits, some of the projects in the portfolio must have net profits resulting in tax liabilities, either because they are conventional generation assets or because they are older renewables projects that have already exhausted their tax benefits. The yield co’s ability to shelter its own tax obligations eliminates the need to access a potentially constrained pool of tax equity investors.

Second, a yield co may allow a parent to finance its corporate operations (and potentially its further project development activities) more cheaply than selling equity at the corporate level, if investors have not appropriately valued the assets’ potential as part of the parent or if investors will pay a premium for the high, stable yields of operating assets in isolation.

Third, selling assets into a yield co may provide certain tax benefits — the parent company can realize the tax value of net operating losses from retained operations immediately rather than over the several years of project cash flows; and the yield co’s investors enjoy the benefits of tax-free distributions (as return of basis — for as long as the yield co does not generate earnings and profits) and a tax shield resulting from incremental depreciation.

Challenges

Several challenges must be addressed in order to effectively use a yield co to monetize solar projects.

First, the yield co must have a large enough portfolio to justify the expense of a public offering.

Second, it must continue to acquire new projects to maintain its favorable tax position and to generate the growth that investors seek.

Third, affiliated entities (such as developer-managers) may incur high costs to protect against potential conflicts of interest when they want to sell assets to the yield co, a risk highlighted by ratings agency reports in connection with the NRG Yield offering.

Fourth, the portfolio must be carefully selected and marketed to match the risk appetite of the target investors, and the market’s lack of familiarity with either the technology or the applicable regulatory regimes can lead to underpriced or failed offerings. For example, in 2013 ,when AES Corp. withdrew its IPO of Silver Ridge Power, a solar yield co, reports attributed the offering’s failure to investor uncertainty about the applicable international regulatory regimes.


http://www.shearman.com/~/media/Files/NewsInsights/Publications/2014/05/New-Horizons-In-Solar-Financing-Freedman-McFadyen-Lamb-051614.pdf

What is New Markets Tax Credit (NMTC) Program?

About The New Markets Tax Credit Program (NMTC) 

NMTC is a federal community development program designed to stimulate the flow of investment capital in underserved communities. 

Taxpayers that make qualified equity investments in designated Community Development Entities (CDEs) receive a tax credit that is claimed over a multi-year credit allowance period. 

Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments and job creation in low-income communities.

More likely that offshore wind turbine will have a maximum capacity of 15MW by 2020

As of 2014, the maximum capacity of an offshore wind turbine is 7.5MW (Enercon E-126 7.5MW).

In my view, the finalisation of the 4-year Azimut project in Spain which aims at enabling the development of a 15 MW offshore wind turbine by 2010 has brought good news to the offshore wind energy market. 

Below is an excerpt of the press release by Gamesa.

Ending of the Azimut project that will enable the development of a 15 MW offshore wind turbine in 2020 

• The Azimut Project has finalized successfully with important progress in technological advances, new materials, simulation tools and a web application.
• Eleven Spanish companies and 22 research centers, coordinated by Gamesa, have joined forces on the Azimut Project to enable the development of world’s largest capacity wind turbine by 2020.

Barcelona, 12 March 2014. The Azimut project, which aims to enable the development of world’s largest capacity wind turbine by 2020, has successfully completed their applied research activities undertaken during the last 4 years. The project has reached the objective of generating knowledge as well as key technologies that will enable the development of a turbine with unit capacity of 15 MW. This turbine will be capable of overcoming the technical and financial hurdles currently limiting the rollout of offshore wind energy, such as availability and cost of energy.

The initiative brings together 11 companies, coordinated by Gamesa, which include Acciona Windpower, Alstom Wind, Acciona Energía, Iberdrola Renovables, Ingeteam, Imatia, Ingeciber, Digsilent Iberica, Técnicas Reunidas, and Tecnitest.

With a 30.3 million euro budget spanning its 4-year duration, this project, under the CENIT program of the CDTI, depending of the Spanish Ministry of Economy, has allowed Spanish industry to fetch technology leadership positions in wind energy generation in marine environments, and helping European countries to comply with the target set by the European Commission of 27% of energy consumption from renewable sources by 2030.

Upon its completion in December 2013, the different companies have obtained important results in key areas mainly developing new technologies, testing process and models, and creating a new web application.

http://www.noodls.com/view/9B32344A1A37F87A8B263039C48FC12FDDA026BF?1504xxx1394633926

Mini-bonds: Overview and examples

Mini-bonds and retail bonds

Similarity

• They are not covered by the Financial Services Compensation Scheme and considered as risky investments. (Hargreaves Lansdown investment expert Adrian Lowcock)
• They are smaller in size compared with corporate bonds or government bonds and are issued by smaller firms.

Differences

• Mini-bonds are not listed on the stock exchange, or on any other platform, while retail bonds are listed on the London Stock Exchange’s Order Book for Retail Bonds.
• Mini-bonds need to be held until expiry some years later while retail bonds on the ORB can be bought and sold during normal market hours, allowing investors the opportunity to both value and sell the bond.

These are also the risks associated with investing in mini-bonds and, in exchange, the mini-bond yield is higher than retail bonds.

A few examples of mini-bonds in the UK renewable energy sector

October 2010 Ecotricity

Ecotricity, a UK-based provider of electricity through renewable energy, raised £10 million through the launch of “EcoBonds” to its 40,000 business customers including body shops, EMI and co-operative banks, small and medium sized businesses, organic food retailers, local authorities, and schools. These are four year bonds with an interest rate of 7% (Ecotricity customers qualify for an improved rate of 7.5%). Minimum investment was set at $500 to encourage small investors to participate. The £10 million raised will fund Ecotricity’s equity investment in 12 wind farms then in development in the UK. The total aggregate projects costs will be £25-£30 million. Ecotricity will fund the remainder through debt financing from the banks. The Ecobond funding will also go toward initial development of solar projects and research and development into tidal energy.

September 2013 A Shade Greener  

A similar offering came from UK-based A Shade Greener which is aiming to raise £10m from small investors (min. £1000) by offering 3 year retail bonds at 6% annual return, but with an interesting twist – all the interest paid upfront as a lump sum. The company will use the proceeds to install panels at no cost to the householder and collects the feed-in tariff payments. As with the CBD bond, this must be held for three years until maturity.

October 2013 Good Energy Group plc

Good Energy Group plc set out to raise £5 million through a retail bond offering to finance investment in solar and wind energy generation. Within three weeks, Good Energy easily met their target, closing the book at £15m three weeks ahead of schedule. The bond offers investors a coupon of 7.25% per annum, paid every half-year. It has an initial term of four years and investments can be executed in multiples of £500 with no upper limit.

December 2013 Secured Energy Bond

Australia-based CBD Energy offered a “Secured Energy Bond” to raise finance to install solar panels for chosen UK businesses at no cost to the business but with income derived from Feed-In Tariffs. The bond is secured against the assets of the company and also has a corporate guarantee from the parent company. It will pay an annual coupon of 6.5%. The minimum investment into the bond is £2,000 for a 3 year fixed term and as the bond is non-transferable, it has to be held to maturity in late 2016.

The EU Climate and Energy Package (a.k.a. The "20-20-20" Package)

In 2009, the EU adopted the Climate and Energy Package as part of the reform of the European Energy Market. The package focuses on emission cuts, renewables and energy efficiency, and is often referred to as the "20-20-20" package. The following targets by 2020 were set for EU member states:

• 20% reduction in EU greenhouse gas emissions from the 1990s levels
• 20% of EU energy consumption is from renewable sources
• 20% improvement in the EU's energy efficiency

The renewable energy targets for each country are as followed: