RENEWABLE & CLEAN ENERGY

Energy text

Introduction

Renewable energy is energy acquired from non-perishable resources in the form of heat, electricity or other forms. Some of the most dominant forms of renewable energy in the world today are wind energy and solar energy. There are other forms of renewable energy generation as well, such as biomass, geothermal and ocean energy. Currently, in terms of technology maturity, wind energy is by far the most mature form of renewable energy generation available in the market currently. This is closely followed by solar, which is currently witnessing a growth spurt in terms of annual installations globally.

The year 2015 was characterised by the world’s commitment to clean energy. At least since the climate agreement at the United Nations Climate Change Conference, held in December 2015 in Paris, there is a global consent to reduce CO2 emissions, and to encourage the usage of clean energy sources.

With energy security being the need of the hour, nations across the world are trying to reduce their dependence on perishable fossil fuels. With availability, accessibility and affordability of fossil fuels showing significant variations depending upon geography, nations have concurred that a switch to renewable energy generation would best serve their purpose of gaining energy security.

Global investment in renewable power and fuels (excluding large hydroelectric projects) was USD270.2billion in 2014, nearly 17% higher than the previous year. This was the first increase for three years, and reflected several influences, including a booming solar installations in China and Japan, totaling USD74.9 billion between those two countries, and a record USD18.6 billion of final investment decisions on offshore wind projects in Europe.

In 2013 the investment numbers, because a record number capacity of wind and solar photovoltaic power was installed, at about 95GW. This compared to 74GW in 2013, 79GW in2012 and 70GW in 2011, the only year in which dollar investment was higher than 2014, at USD278.8 billion.

A key feature of 2014 was the continuing spread of renewable energy to new markets. Investment in developed countries, at USD131.3 billion, was up 36%on the previous year and came the closest ever to overhauling the total for developing economies, at USD138.9 billion, up just 3% on the year. Indonesia, Chile, Mexico, Kenya, South Africa and Turkey were all in the billion-dollar-plus club in 2014 in terms of investment in renewables, and others, such as Jordan, Uruguay, Panama, the Philippines and Myanmar were in the USD500 million to USD1 billion range.

Renewables faced challenges as 2015 began – notably from policy uncertainty in markets such as the US and the UK, retroactive policy changes in countries such as Italy and Romania, and concerns about grid access for small-scale solar in Japan and some US states. The most daunting challenge was, at first sight, the impact of the 50%-plus collapse in the oil price in the second half of 2015. However, although the oil price is likely to dampen investor confidence in parts of the sector, such as solar in oil-exporting countries, and biofuels, in most parts of the world, oil and renewables do not compete for power investment dollars. Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh.

Australia

Energy production in Australia is also a significant primary industry and contributor to the Australian economy. Australia is a net energy exporter.

Wind power is currently the cheapest source of large-scale renewable energy. It involves generating electricity from the naturally occurring power of the wind. Energy constitutes a large portion of Australia’s total exports.

The most recently published Clean Energy Australia Report 2014 shows more than 15,000 businesses have now installed a solar power system, helping them save a collective AUD64 million on their power bills every year.

13.47% of Australia’s electricity came from renewable sources in 2014, enough to power 4.5 million average homes for a year. This was a fall from 14.76% the year before, mainly due to lower rainfall in hydro catchment areas.

Other key findings from the Clean Energy Australia Report 2014 are:

  • Bundaberg in Queensland was Australia’s solar capital in 2014, followed by Mandurah in Western Australia and Hervey Bay, which is just over 100 km from Bundaberg
  • Approximately 40% of South Australia’s power came from renewable energy during 2014, while about 95% of the electricity used by Tasmanians came from renewables. The next best was Western Australia (13%).

ASX – Energy

Energy stocks make up 4.4% of the ASX 200 index and 4.7% of the All Ordinaries index. In September 2010 the Clean Technology Sector fact sheet illustrated that the index comprised 76 companies with a market cap of AUD10 billion. These companies operated in the renewable energy, alternative fuels, waste & recycling, energy efficiency and carbon sectors.

China

China is the world’s most populous country with a fast-growing economy that has led it to be the largest energy consumer and producer in the world. Rapidly increasing energy demand, especially for petroleum and other liquids, has made China influential in world energy markets.

China became the largest global energy consumer in 2011 and is the world’s second-largest oil consumer behind the US. China is the world’s most populous country (1.36 billion people in 2013) and has a rapidly growing economy, which has driven the country’s high overall energy demand and the quest for securing energy resources.

In its latest World Energy Outlook, the International Energy Agency (IEA) says that “China dominates energy demand growth until the mid-2020s,” becoming the biggest oil user by the early 2030s. BP plc, in its own forecasts, predicts that by 2035, Chinese oil demand will climb 67%, while its gas use will rise 270%.

While much has been made of a slowdown in China, oil demand there still increased by 390,000 bpd (following a 500,000 bpd increase from 2011-2012). Despite the slowdown in the rate of growth from the previous year, this represented a 3.8% consumption increase for China, 2.5 times the global increase of 1.4%.

Together the US and China were responsible for 56% of the global increase in oil demand in 2013. The big difference between the two countries is that US oil production was up far in excess of our increase in consumption, while oil production in China edged up by only 24,000 bpd. This means that while US oil imports declined and finished product exports (e.g., gasoline, diesel, jet fuel) increased, China’s dependence on oil imports continued to increase.

Japan

Japan is well-positioned for a renewable renaissance. Since the Japanese earthquake and tsunami in 2011, the country understandably sees an explosion of interest in renewable energy. A plethora of wind and solar projects were announced, especially in the early days after the Fukushima nuclear plants were shut down. A well-known financial services company said recently that it will invest as much as USD487 million in Japanese fuel cell, solar, wind and biomass efforts. The Japanese government, meanwhile, has set renewable targets of between 25% and 35% of total power generation by 2030, by which time some USD700 billion would be invested in new, renewable energy.

Despite these developments, the Japanese government still backs nuclear power as a key energy provider. Prime Minister Shinzo Abe, breaking from the previous Liberal Democratic Party (LDP) government that had committed to phasing out of nuclear power by 2030, said in early 2013 that the country would begin restarting its plants as soon as new safety guidelines are in place. It’s likely to be a slow process: In the summer of 2013, Japan had just two of its 50 reactors operational, and had four providing power by 2015, according to Japan’s Institute of Energy Economics.

Under the National Energy Strategy adopted in 2006, the goal is to improve Japan’s overall energy efficiency by 30% in 2030. The country has started toward that goal, one project at a time. Here are some key announcements:

  • Honda said this year it would build a 10-megawatt solar installation at a property that also includes a test track in the city of the Tochigi prefecture city of Sakura. The company said it would be in a position to sell electricity by 2015
  • Mitsubishi and C-Tech Corporation are currently building a very large 77-megawatt solar complex in Tahara City
  • Japanese trader Mitsui announced plans in 2011 to build solar plants able to supply 30,000 households in the region most affected by the earthquake and tsunami
  • Habitat for Humanity has also installed solar panels in storm-damaged regions of Japan as part of its Solar Home Recovery Project. Thirteen families are to benefit from the first phase of the program, with three-kilowatt systems. According to Hisato Harako, whose Higashinihon Sorana is installing the solar arrays, “The need for renewable energy is now higher than before the disaster. I hope this project will help bring about a positive change for the future of disaster-hit areas.”
  • Soon after the earthquake, a mega-solar project involving 38,000 panels was opened on an industrial waste site in the Tokyo suburb of Kawasaki City
  • Japan has 2.3-gigawatts of installed wind power, with regulations requiring any tower over approximately 100 feet to have earthquake proof technology. Some 80% of the Japanese wind power infrastructure survived the natural disaster, including the Kamisu offshore farm, located only 180 miles from the epicenter. In early 2013, a 143-turbine, one-gigawatt offshore wind farm was announced for a location just nine miles from Fukishima. If completed by 2020 as planned, it would be the world’s largest.

South Korea

South Korea is the eighth-largest trading nation in the world, with its recent trade volume reaching USD1 trillion for two consecutive years. South Korea’s rapid economic growth over a short period of time has been backed up by a stable energy supply. However, the country has practically no natural resources and for this reason, the government has faced consistent challenges in setting its energy policy objectives in order to meet diversified demands.

In the past, South Korea’s energy policy focused on developing energy and securing are liable energy supply in order to support economic growth. However, the oil crisis of the 1970s and the environmental problems which emerged on the world’s radar in the late 1980s have led to renewed calls for policies that can tackle the issues surrounding energy security.

Simultaneously, with the onset of neoliberalism in the 1990s, discussions on adopting a market mechanism and competition in the energy market have become brisk. The early 2000s saw a focus on new and renewable forms of energy as a way to respond to the challenge of climate change while driving green growth. Recently, however, existing policy frameworks in South Korea, which focused on expanding supply whenever consumption increased have proved to be unsustainable in matching energy supply and demand. What is called for is a paradigm shift in its energy policies, shifting its attention from the supply side to the consumption side.

South Korea ranks tenth in the world in terms of energy consumption, but lacking natural resources, a staggering 96% of the country’s energy consumption relies on imports, amounting to USD184.8 billion in 2012, the monetary equivalent to nearly one-third of its total imports. Imports of oil, LNG and coal add up to nearly 99% of energy imports. Nonetheless, energy consumption has continued to increase in line with economic growth. With traditional energy-intensive industries such as petrochemicals and steel, energy intensity is relatively high in South Korea compared with that of other countries.

South Korea’s Cabinet in mid-January approved the country’s Second Basic Energy Plan, an energy policy framework covering the period 2014-2035. This marked the first comprehensive statement of new President Park Geun-hye’s energy ambitions. Minister for Trade, Industry and Energy Yoon Sang-jick called it a decisive shift from “conventional supply control to demand-side control”.

The key measures set out in the plan were as follows:

  • The target for nuclear power generation would be reduced from 41% by 2030 to 29% by 2035
  • A target to reduce electricity consumption by 15% below Business as Usual (BAU) by 2035 through energy tax and electricity price reform.
  • The renewable energy target of 11% by would be delivered by 2035 rather than the previous plan of 2030. A shift in focus towards solar and wind, less on bio energy and energy from waste
  • A target of 15% of electricity from distributed power generation by 2035, up from the current 5%. Where long distance power transmission was unavoidable, greater consideration would be given to underground lines.
  • New coal power stations should apply ‘best available technology”. The government would invest in clean coal, including Coal to Liquid (CTL) and Carbon Capture and Storage (CCS) pilot plants. [Comment: but no requirement for new coal plants to be CCS-ready.]
  • All new buildings should be “zero energy” by 2025
  • The introduction of a Renewable Heat Obligation for large buildings (10% of heat energy consumption to come from renewables)
  • Pursuit of an East Asia grid network, potentially linking electricity generation in Russia through North Korea to South Korea.

GC Partners Asia Capabilities

GC Partners Asia Capabilities

  1. GCP is uniquely positioned and committed, with experienced tertiary qualified bi-lingual staff, to provide investment banking, corporate finance and advisory services to companies involved with the global mining industry.
  2. We act for private companies and companies listed on the LSE & AIM, ASX and TSX & TSXV stock exchanges. Being located “on the ground” amongst the key Asian markets, GCP is attuned to local business practices, conduct, processes & culture, as well as news flow, corporate announcements, government policy and economic initiatives. Combined with regular contact and our long standing relationships with key industry participants, we are equipped with an understanding of the demand and the potential for sources of corporate equity investment, project equity & debt, joint ventures, and for product offtake.
  3. With Australia’s proximity to the key Asian markets, and combined with GCP’s strong differentiation, we are able to assist a variety of alternative energy companies with their financing requirements who have projects along the full value chain, from development to production.
  4. Our current and past clients have projects in oil & gas, uranium, iron ore, copper, gold, nickel, graphite, kaolin, potash and phosphate. These projects are located in Australia, Africa, Central Asia and SE Asia.