BNP Paribas Fortis renewable energy monthly - Virtual Metals

Merchant & Private Banking 

INVESTMENT RESEARCH 

BNP Paribas Fortis renewable energy monthly 

December 2009 

Solar, wind, biofuels and 

biomass, marine and 

carbon capture. 

VM Group 

Tel. +44 20 7569 5930 

info@vmgroup.co.uk

BNP Paribas Fortis/VM Group December 2009 | BNP Paribas Fortis renewable energy monthly | 1 

Contents 

Analysis 3 

Focus 7 

Americas 9 

Europe 12 

Asia, Africa and Pacific 14 

Technology & research 17 

Prices 19 

Disclaimer and copyright 20 

About VM Group 21 

BNP Paribas Fortis renewable energy monthly is an exclusive energy research 

joint venture between Fortis Bank SA/NV and VM Group.


Analysis 

Analyst: Paul Hannon 

VM Group 

Tel: +44 20 7569 5930 

Email: paul@vmgroup.co.uk 

Analyst: Gary Mead 

VM Group 

Tel: +44 20 7569 5930 

Email: gary@vmgroup.co.uk 

The year ahead: hold on tight 

The arrival of Barack Obama in the White House in January has brought about 

a massive spending spree to build up renewable energy capacity in the US. So 

the renewable energy sector has had a good 2009 – the likelihood is that it will 

have an even better 2010. 

Our assessment of how the renewable energy sector will fare in 2010 is tethered 

to the wide-ranging energy forecasts published earlier this month in the 

December issues of our monthly Energy Report and North American Energy 

Report. 1 In those reports we forecast that energy prices across the board will be 

substantially higher throughout next year. This in turn will trigger a further 

strategic shift towards greater investment in and expanded use of all renewable 

energy sources. Central to the analysis in our energy reports is a projection that 

the price of West Texas Intermediate, the US crude oil benchmark, will hit two 

peaks in 2010 – first at $120/barrel in the spring, and then at $164/barrel in the 

autumn. 

We base this analysis on an expected curbing of oil supplies by Saudi Arabia 

(and to a lesser extent the rest of Opec) in an attempt to deliberately push up the 

price of crude oil. Although this will only reinforce attitudes that Western 

economies remain hostage not only the vagaries of the market place but also to 

the intractable political problems of the Middle East, the return to higher oil 

prices will have a critical impact on the renewable sector. 

The sentiment that we have stated in these two other forecasts holds equally true 

here: “As a result of the higher oil prices, renewable energy projects that were 

considered marginal last year will be moved to centre stage, and greater US 

government support will be channelled into wind-power and geothermal 

research.” In addition to offering a succinct outlook on how energy markets will 

unfold during 2010, this single sentence also sums up the dichotomy that 

currently exists in the renewable energy industry: one side ebbs and flows in the 

wake of commodity markets, while the other side is technology-driven. 

Ethanol in the US and EU 

Corn futures, CBOT ($/bushel) 

5.0 

4.5 

4.0 

3.5 

3.0 

2.5 

Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 

Source: Reuters Ecowin 

Ethanol futures, CBOT ($/gallon) 

2.15 

2.05 

1.95 

1.85 

1.75 

1.65 

1.55 

1.45 

1.35 

1.25 



Before we present our 2010 renewable energy forecast in detail, let us look at 

how our projections for corn, ethanol and palm oil fared in 2009. In January we 

said there would be a collapse in demand for gasoline, which would impact on 

both corn and ethanol prices. Even though gasoline demand began to show signs 

of recovery later in the year, the global economic downturn effectively 

dampened driving habits and, in turn, curbed gasoline sales. 

1 http://www.virtualmetals.co.uk/pdf/FEM1209.pdf 

http://www.virtualmetals.co.uk/pdf/FUE0912.pdf

4 | BNP Paribas Fortis renewable energy monthly | December 2009 BNP Paribas Fortis/VM Group 

Corn futures on the Chicago Board of Trade (CBOT) so far this year have 

averaged $3.81/bushel, having traded to a high of $4.59/bushel in June and a low 

of $3.06/bushel in September. As we predicted, there was no second Great Corn 

Shock, which in 2008 saw prices spiral upwards. In this report in January we 

noted: “Although US ethanol prices in the Midwest market were stumbling 

around $1.66/gallon in early January, we expect prices to edge higher towards 

$2/gallon in what will be a lacklustre year for the business.” The reality was not 

very far from that projection, as ethanol prices have so far this year averaged 

$1.65 and, as we expected, prices have recently drifted back towards $2/gallon. 

By early December, CBOT ethanol prices were quoted at $2.02/gallon. 

In 2010, greater demand for domestic-sourced ethanol supplies in the US and 

Europe will mean corn prices will remain firm and steadily rise until cellulosic 

ethanol begins to make an impact on the marketplace. Until that happens, 

sometime in 2012, corn prices are expected to arch upwards. CBOT trading will 

take prices up and beyond $5/bushel in the early part of 2010, and the muchfeared 

Corn Shock of 2008 will be reprised in H2 2010, with prices surpassing 

$7/bushel by the autumn. With US gasoline prices heading over $4/gallon during 

2010, corn ethanol futures will rise in tandem, to more than $2.80/gallon. 

Palm oil prices 

Our forecast for crude palm oil prices in 2009 was less impressive, and our 

projection of an average of $525/t for the year has been easily surpassed. The 

overhang of hefty palm oil inventories depressed prices during Q1 2009, when a 

year-low price of $492/t was recorded in January. But after that, spirited buying 

took prices to a peak for the year of $821 in mid-May and prices for the year so 

far have averaged $637/t. 

Palm oil futures, MDEX ($/tonne) 

850 

800 

750 

700 

650 

600 

550 

500 

450 

400 

2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 


As for 2010, we still have the uncertainties of what so far has proved to be a 

moderate El Nino, which typically creates drier than normal conditions across 

Southeast Asia, Indonesia especially. This is unlikely to impact palm oil output 

across the region in 2010 but may well reduce yields in 2011. Nevertheless, our 

expectation that crude oil prices will jump in 2010 will throw much greater 

emphasis on alternatives, including biodiesel, for which palm oil remains a key 

feedstock. Following the rough rule of thumb that palm oil prices trade up to 10 

times the price of crude oil (the average for 2009 has been, to date, 9.5 times), 

we expect Malaysian crude palm oil futures to average $950/t in 2010, having 

peaked first in May at $1,100/t, then falling back before rebounding in August- 

September to more than $1,400/t. 

Carbon prices 

Our forecast for carbon markets throughout 2009 was very close to the mark. 

Prices for the benchmark December 2009 contract started the year at €15.40/t 

and by early December were €14.80/t. In the intervening period, carbon 

certificates traded as low as €8.06/t, but – in line with our forecast – a support


level between €9.80/t-€10.50/t emerged. In January this year we projected that 

“European emission allowances for 2009 delivery will trade at an average price 

of €12.80/t”; in reality by mid-December the average was €13.19/t. 

As for the carbon trading market, significant uncertainty will follow any 

settlement of a new climate change accord – either in December or early in 2010 

– because many important loose ends need to be tied up, not least a reform of the 

much-criticised Clean Development Mechanism, under which industrialised 

nations help developing countries to cut emissions. 

Carbon futures, ECX CFI (€/tonne) 

17 

16 

15 

14 

13 

12 

11 

10 

9 

8 

7 



Despite the expected US pledge to cut emissions, Obama still has to get the 

legislation in place. When this happens, the fledgling US carbon credit market 

will be set to skyrocket. It may that the Obama administration struggles to get 

this legislation through. In which case the US Environmental Protection Agency 

(EPA) may find its decision on 8 th December to declare greenhouse gases a 

danger to public health is a useful surrogate. The EPA’s move is, strictly 

speaking, an enabling point that will allow the agency to impose new emissions’ 

standards for automobiles from March 2010 – but it also opens the way for the 

federal authorities to impose much more stringent regulations against emissions 

from a wide swathe of US industry. This kind of backdoor regulation is not what 

the White House wants, but it will use it as a starting-point and is clearly a 

warning shot across the bows of the US Congress. 

What the White House really wants is Congressional approval for the 

introduction of a cap-and-trade scheme to cut emissions. Even though such 

schemes are consistently derided by the international petroleum industry, which 

would prefer carbon taxes, the European Emissions Trading Scheme (ETS) has 

established itself as a useful model. The ETS currently accounts for 84% of the 

world’s carbon market in value terms, compared with just 1% for the US. 

Obama has predicted that carbon credits worth $646bn will be auctioned in the 

first seven years of the mandatory scheme he is backing; other estimates put this 

as high as $2,000bn. The legislation will not take effect until 2012, but trading 

can be expected to escalate in advance of the compliance year. With the US in 

the carbon trading market, another giant step towards a truly global trading 

platform will have been taken. 

Linking the ETS with a federal US system may be considered ambitious at this 

stage, but it would increase the liquidity and stability of both schemes, cover 

between 13%-27% of global emissions, and possibly reduce costs by 30%-50%. 

It would also provide momentum for an eventual OECD-wide trading scheme. 

Volatility will be the norm for carbon trading markets in 2010 and, as the 

leading industrialised economies emerge from recession, we expect carbon 

prices to rise significantly. The current trading range of €12/t-€14.50/t will slip 

into the background and prices will find a new support level of €17.50/t before 

breaching the €20/t towards the end of 2010.


Technological challenges 

The falling cost of solar power and the emergence of more reliable wind-power 

technology will be two key factors in supporting the wider use of these types of 

renewable energy in the years ahead. During 2009, the price of a standard solar 

module, as measured by the Solarbuzz Module Retail Price Index, fell by about 

10% to €4.23/Watt ($6.28) in Europe and to $4.31/Watt in the US. Part of the 

downward pressure on prices resulted not only from uncertain market conditions 

but also from a surplus in production capacity, which some estimates had 

suggested would depress prices by as much as 25%. 

Wind-power technology is now developing rapidly with onshore turbines 

frequently rated between 2 MW-3 MW each. In offshore windfarms, economies 

of scale and maintenance problems dictate that even higher ratings will become 

the norm, but there are physical limits as to how heavy these 4 MW-6 MW units 

can be. The urgency of the problem has already been identified in the US where 

Energy Secretary Steven Chu announced in late November the creation of a 

$45m program to design the next generation of wind turbines, which followed 

hot on the heels of a $24m wind-power research program unveiled in mid- 

October. 

The rapidly expanding US wind-power market means that the life-span of a 

turbine is decreasing, up to the point that three or perhaps four generations of 

wind-power technology can be expected to be installed on a site during the 

course of a 25-year lease. Colorado-based wind consultants Pike Research 

attempted in October to quantify this turnover of wind units, by calculating that 

over the next five years there will be 40,000 new onshore turbines installed in 

the US. Of this eye-watering number, an estimated 45% will be replacement 

units at existing windfarms, as developers replace aging equipment and install 

larger units that require less maintenance downtime. 

Technical breakthroughs are also expected next year among ethanol producers, 

with Sioux Falls-based ethanol group Poet announcing in mid-November that it 

has cut production costs of cellulosic ethanol from $4.13/gallon to $2.35/gallon 

in the past 12 months, principally by reducing energy consumption and 

controlling its enzyme and raw material costs more efficiently. Poet’s $8m pilot 

cellulosic plant in Scotland, South Dakota, which produces 20,000 gallons of 

fuel annually, using corncobs as a feedstock, is a test-bed for a proposed $200m 

commercial-scale plant that will begin production in 2011. This scaled-up plant 

is expected to cut the price of cellulosic ethanol to below $2/gallon, compared 

with an industry average for ethanol produced from more expensive corn kernels 

of $1.50-$1.70/gallon. 

The emergence of any new technology is a constant accretion of minor 

improvements that may cut costs or substitute raw materials. Occasionally, a 

flash of brilliance will overturn all the previous equations and set things on a 

completely new track. As billions of dollars, yuan and euros are poured into 

renewable energy research programmes globally, these flashes of genius will 

occur more frequently, and the world in which we live will become less 

dependent on fossil fuels. But in the meantime, brace yourself for a turbulent but 

profitable year ahead.


Focus 

Analyst: Paul Hannon 

VM Group 

Tel: +44 20 7569 5930 

Email: paul@vmgroup.co.uk 

Windfarms and property prices 

The issue of property prices adjacent to large-scale renewable energy projects 

goes to the heart of planning approvals, public perceptions of renewable energy 

and the likely expansion of windfarms. So, for anyone concerned about whether 

that windfarm next door might affect the value of their property, there is 

comforting news from the US Department of Energy’s Lawrence Berkeley 

National Laboratory, which published in early December a three-year study of 

7,500 house sales in nine US states. 

Berkeley Lab researchers collected data on properties within 10 miles of 24 

existing windfarms – the closest home was 800 ft from a turbine – but found no 

evidence of price erosion due to the proximity of the wind plant and equipment. 

“Neither the view of wind energy facilities nor the distance of the home to those 

facilities was found to have any consistent, measurable, and significant effect on 

the selling prices of nearby homes,” according to report author Ben Hoen. “No 

matter how we looked at the data, the same result kept coming back – no 

evidence of widespread impacts.” 

Results from the temporal aspects model 

Sales volumes by period and distance 

Source: Ernest Orlando Lawrence Berkeley National Laboratory 

Source: Ernest Orlando Lawrence Berkeley National Laboratory 

Data on house sales spanned 1996-2007, which encompassed the period before 

the announcement of each windfarm facility to a point well beyond its 

construction and connection to the grid. Co-author and project manager Ryan 

Wiser also noted: “Though the analysis cannot dismiss the possibility individual 

homes or small numbers of homes have been negatively impacted, it finds that if 

these impacts do exist, their frequency is too small to result in any widespread, 

statistically observable impact.” 

The conclusions of the study are drawn from eight different hedonic pricing 

models, as well as repeat sales and sales volume models. Hedonic modelling is a 

statistical analysis method used to estimate the impact of house characteristics 

on sales prices. None of the models uncovered conclusive statistical evidence of 

widespread property value effects that might exist in communities with nearby 

windfarms. “It took three years to collect all of the data and analyze more than 

50 different statistical model specifications,” Wiser added. “But without that 

effort, we would not have been confident we were giving stakeholders the best 

information possible.” 

“Although studies that have investigated residential sales prices near 

conventional power plants, high voltage transmission lines, and roads have 

found some property value impacts,” says co-author and San Diego State 

University Economics Department Chair Mark Thayer, “the same cannot be said 

for wind energy facilities, at least given our sample of transactions.”


Given that the planning process for a windfarm can take between three and five 

years, the long-term impact on the landscape is miniscule in comparison with 

other types of energy projects. The essential point about windfarms is they are 

not nuclear power plants or massive coal-fired power stations. The technology 

used in windfarms, although it is becoming more sophisticated with the advent 

of cryogenic cooling of superconductor wires, remains relatively simple. No 

windfarm would be considered a suitable target for a terrorist attack, nor do they 

produce by-products that require 10,000 years of custodial care. Furthermore, 

the area surrounding windfarms remains open to a wide range of industrial and 

commercial uses unlike nuclear power plants such as the Diablo Canyon plant in 

California, which is surrounded by a 12,000 acre exclusion zone that is off limits 

to development. 

Offshore windfarms in the UK 

Offshore windfarms in the UK 

Source: Open University 

Source: The Times


Americas 

Ethanol, CBOT ($/gallon) 

2.2 

2.1 

2.0 

1.9 

1.8 

09-Nov 16-Nov 23-Nov 30-Nov 07-Dec 

1st position 


RBOB gasoline, Nymex ($/gallon) 

2.08 

2.06 

2.04 

2.02 

2.00 

1.98 

1.96 

1.94 

1.92 

1.90 

2nd position 


1st position 


Corn, CBOT (c/bushel) 

430 

420 

410 

400 

390 

380 

370 

360 

2nd position 


1st position 


2nd position 

News 

• Dec 4 th : Private equity group Hudson Clean Energy Partners raised $1bn to 

invest in energy technology projects. 

• Dec 3 rd : Canadian Solar announced plans to build a C$24m ($22.8m) solar 

panel plant in Ontario capable of making 200 MW of modules annually. 

• Dec 2 nd : The Florida Public Service Commission approved plans for a $185m 

biomass project in Manatee County, south of Tampa. 

• Dec 2 nd : Duke Energy brought its 99 MW Campbell Hill, Wyoming windfarm 

online. 

• Dec 2 nd : GE Energy Financial Services said it will invest $117m in a 99 MW 

Oklahoma windfarm planned by Horizon Wind Energy. 

• Dec 1 st : The US Environmental Protection Agency postponed until mid-2010 

any decision to increase ethanol-blending mandates to 15%. 

• Nov 30 th : Energy Secretary Steven Chu warned the US risked losing its 

competitive edge in renewable energy technology to China. 

• Nov 30 th : Constellation Energy said it would buy the 70 MW Criterion 

windfarm in Maryland from Clipper Wind-power. 

• Nov 25 th : Atlanta-based ethanol producer Global Energy filed for Chapter 11 

bankruptcy protection as it restructures into a biomass power producer. 

• Nov 25 th : Pacific Ethanol said it would resume production of ethanol at its 

Burley, Idaho plant in January. 

• Nov 25 th : California unveiled a draft cap-and-trade plan, intended to cut 

greenhouse gas emissions to 1990 levels by 2020. 

• Nov 23 rd : Akron-based FirstEnergy Corp bought the rights to an underground 

limestone mine in Ohio to develop as a compressed air energy power plant. 

• Nov 23 rd : Spanish energy group Acciona said it completed construction of its 

$550m 250 MW Eurus windfarm in Mexico. 

• Nov 19 th : Cornhusker Energy Lexington filed a $1.8m lawsuit against gas 

pipeline group Kinder Morgan for causing an explosion at its Nebraska 

ethanol plant. 

• Nov 18 th : Biorefinery developer ZeaChem started construction on a 250,000 

gallon/year cellulosic ethanol plant in Oregon. 

• Nov 14 th : Brazil said it will cut carbon emissions by 36%-39% by 2020, 

though only on a voluntary, not a mandatory, basis. 

Analysis 

PG&E buys windfarm 

Pacific Gas and Electric (PG&E) continues to earn plaudits for its far-reaching 

involvement in renewable energy projects, but few expected the northern 

California utility to actually buy and operate its own windfarm. This latest foray 

by PG&E, announced in early December, entails the purchase of a 246 MW 

windfarm being built by Spanish renewable energy developer Iberdrola 

Renovables. When finished, the Manzana windfarm and related transmission 

infrastructure will cost more than $900m. The 7,000-acre windfarm is located in 

southern California’s Tehachapi region, which is best known for its recreational 

gliding and the nearby Edwards Air Force base. PG&E, which already owns 

several power plants, including the 2,200 MW Diablo Canyon nuclear facility 

north of Los Angeles, has also outlined plans to invest $750m to develop 

250 MW of solar power capacity. 

Stelmach takes lead on carbon pipeline 

Alberta Premier Ed Stelmach also broke fresh ground in late November by 

announcing joint plans with the Canadian federal government to build a C$558m 

($529m) pipeline to transport CO 2 from Edmonton to aging oilfields in the 

centre of the province. The pipeline, which will have a design capacity to deliver 

40,000 tonnes/day (t/d) of CO 2 , will, according to Stelmach, “significantly 

advance Alberta’s capacity for future carbon capture and storage projects. The 

Alberta Carbon Trunk Line will be the backbone of CO 2 transportation for 

Alberta.” The investment by the Alberta government will amount to C$495m


over a 15-year period, with the balance coming from central government and 

from special government-backed funds set up to develop clean energy and new 

technology. Construction of the 149-mile pipeline is expected to start in 2011 

and become operational with initial flows of 5,100 t/d in late 2012. 

NEX Index 

280 

260 

240 

220 

200 

180 

160 

140 

120 

100 

Jan-09 Apr-09 Jul-09 Oct-09 

Source: Wilderhill 

Sugar, ICE Futures US (c/lb) 

23.5 

23.0 

22.5 

22.0 

21.5 

21.0 

11-Nov 18-Nov 25-Nov 02-Dec 

Air Force looks for cost savings 

The US Air Force might not be the most cost-conscious organisation in the 

world, but in late November it announced plans to test the use of commercial 

grade Jet A fuel as an alternative to the more expensive military grade JP-8 fuel. 

Conducted over the next year, the tests will concentrate on heavy lift aircraft 

such as the Lockheed C-5 Galaxy, Boeing C-17 Globemaster III and Lockheed 

Martin C-130 Hercules aircraft at four different Air Force bases. Since Jet A is 

more widely available than its military equivalent, savings of up to $40m a year 

on logistics could be achieved, according to officials at the Air Force’s 

Petroleum Agency. Further savings are expected, by reducing or eliminating 

some additives found in JP-8, and by introducing additives such as icing 

inhibitors earlier into the supply chain. The latest move is in line with a new Air 

Force energy saving program launched in June that contains laudable goals for 

cutting consumption and finding alternative fuel sources. Among these cuts are a 

10% reduction in aviation fuel use per hour of operation, an annual 2% reduction 

in fuel use by the service’s motor vehicle fleet, and a 3% annual cut in energy 

intensity at Air Force installations. The push for alterative fuels is intended to 

achieve an annual 10% increase in non-petroleum based fuels in the motor 

vehicle fleet and to increase the use of renewable energy at Air Force facilities to 

50% within a 25-year period. 

Upturn for biofuels 

Proving there is still life in the biofuels industry, US Department of Energy 

Secretary Steven Chu and Agriculture Secretary Tom Vilsack have poured 

$564m in American Recovery and Reinvestment Act funds into 19 biorefinery 

projects in 15 US states. Details of the funding were revealed in early December 

and show government support for a range of projects that will produce advanced 

biofuels, biopower, and bioproducts using biomass feedstocks at the pilot, 

demonstration, and full-commercial scale. 

1st position 


2nd position 

Imaginative ethanol move 

Further signs of activity in the ethanol industry were evident in late November, 

when MGP Ingredients sold half of its mothballed alcohol plant in Pekin, Illinois 

to Seacor Energy for $15m. The reopened plant, which will operate as a joint 

venture known as Illinois Corn Processing, will produce beverage and industrial 

food grade alcohol for MGP to market, and ethanol fuel, which Seacor will sell. 

The joint venture represents an unusual combination of businesses that should 

transform the economics of an otherwise non-viable plant, showing how the 

ethanol industry is learning to find business opportunities in the recession. 

Uphill struggle 

The scale of the uphill struggle the US ethanol industry faces was underlined in 

mid-November by Energy Information Administration (EIA) data showing that 

total annual ethanol production capacity in the country amounted to 12.5bn 

gallons, but that demand only amounted to 10.6bn gallons. The EIA is 

nevertheless optimistic that current surplus capacity will be utilized in the near 

future, as government mandates require current blending of ethanol into gasoline 

to increase to 13.2bn gallons by 2012. 

Canadian shift on carbon tax 

Another sign of a politician craning his neck for attention ahead of the 

Copenhagen summit emerged in late November, when Canadian opposition 

leader Michael Ignatieff said he was abandoning his predecessor’s policy of a 

carbon-tax in favor of an emissions cap-and-trade system to fight climate 

change. Optimistically, he promised also that if he is elected Prime Minister, he 

would introduce the scheme irrespective of what action the US decided to take.


Ignatieff also said his party would use 1990 as its benchmark year on which to 

base greenhouse-gas reductions, compared with current federal government 

policy of using 2006 as a base year. Although Ignatieff did not spell out the level 

of emissions cuts he supported, his party recently backed a proposal to cut 1990 

emissions levels by 25% by 2020. 

California exports solar technology 

California-based photovoltaic group Solyndra, which specialises in supplying 

commercial-scale rooftop systems, showed just what it takes to crack the 

European market by signing two separate supply deals in the past month. The 

first, announced in late November, entails a $105m contract to supply Milanbased 

Sun Systems with solar panels for sale in southern Europe. A week after 

the Milan deal, Solyndra revealed it had signed a long-term framework 

agreement with the Trier-based roofing system manufacturer Alwitra GmbH. 

Panels for both contracts will be manufactured in Solyndra’s two plants in 

California and shipped to Italy and Germany. 

And then … 

In the week before the Copenhagen Climate Change summit, we learned: 

• The US Energy Department will invest $979m in three carbon capture 

projects in West Virginia, Alabama and Texas. 

• A US survey by Hart Research showed a majority of respondents in favour of 

a carbon tax rather than a cap-and-trade emissions scheme. 

• US broker Knight Capital launched a new carbon trading business. 

• Ambitious carbon pricing schemes will not affect global economic recovery, 

according to the International Monetary Fund. 

• New York Mayor Michael Bloomberg shelved plans to force owners of the 

city’s larger office buildings to reduce greenhouse gas emissions. 

• Carbon allowances offered under the US Regional Greenhouse Gas Initiative 

were auctioned for $2.05 each, a fall of 6% from the September auction. 

• US greenhouse gas emissions fell by 2.2% in 2008, the Energy Information 

Administration reported. 

• US Senator John Kerry unveiled the proposed International Climate Change 

Investment Act, designed to fund global action on climate change. 

• Brazil said it would support UN plans for carbon credits from reducing 

deforestation and degradation. 

• Prime Minister Stephen Harper rejected UN calls to improve Canada’s target 

of cutting 2006 level greenhouse gas emissions by 20% by 2020. 

Outlook 

The spotlight shines on the centre of the stage; everyone waits for the main 

player to take his cue to walk on. President Obama has already displayed a 

good sense of theatrical timing, but he has also been blooded in the difficult 

business of managing people’s expectations. Our view is that the US, China, 

India and the EU will reach an accord on climate change, either at the 

Copenhagen summit or shortly afterwards. Too much political capital has 

been invested by everyone in this initiative to allow it to fail; but all it takes 

is one uncompromising position to delay an agreement until the spring.


Europe 

Brent crude, ICE Futures ($/barrel) 

81 

80 

79 

78 

77 

76 

75 


Pos 1 Pos 2 


European biodiesel prices (€/tonne) 

950 

900 

850 

800 

750 

700 

650 

Jun-09 Aug-09 Oct-09 

RME FAME 


Carbon, ICE Futures (€/tonne) 

15.5 

15.0 

14.5 

14.0 

13.5 

13.0 

12.5 

12.0 

09-Nov 17-Nov 25-Nov 03-Dec 

Pos 1 Pos 2 


News 

• Dec 3 rd : RWE Innogy inaugurated its 90 MW Rhyl Flats windfarm off the 

coast of Wales. 

• Dec 2 nd : Turkey started the privatisation sale of 52 small hydroelectric plants. 

• Dec 2 nd : The UK Government announced £6m ($9.8m) funding for smart grid 

demonstration projects. 

• Dec 1 st : Günther Oettinger was appointed as the new energy commissioner of 

the European Union. 

• Nov 27 th : E.ON of Germany and Abengoa of Spain said they will invest 

€550m ($815m) to build two 50 MW thermal solar plants near Seville. 

• Nov 27 th : UK Prime Minister Gordon Brown called for a $10bn fund for 

developing countries to help secure a deal at Copenhagen. 

• Nov 26 th : The European Commission said it will appeal a court ruling that it 

had exceeded its powers in curbing Polish and Estonian carbon allowances. 

• Nov 26 th : The Russian Government approved a new energy strategy up to 

2030 with major investments planned for renewable energy. 

• Nov 24 th : Italian energy group Enel bought a minority stake in Geronimo 

Wind Energy as a way to expand its wind-power activities in the US. 

• Nov 23 rd : The European Commission announced a €100m loan for energy 

project in African, Caribbean and Pacific countries. 

• Nov 18 th : Portuguese renewable energy group EPD Renewables said it will 

invest $4bn in the US wind market over the next three years. 

• Nov 18 th : The Spanish Government forecast it would bring on stream 8,800 

MW of renewable energy generating capacity by 2012. 

• Nov 16 th : German utility RWE said it will build 3,000 MW of hydroelectric 

power capacity in Serbia. 

Analysis 

Norway adds piece to grid jigsaw 

The jigsaw puzzle of the European power transmission network will receive 

another crucial piece if Norwegian grid operator Statnett pushes on with its plans 

to build a NKr3bn ($523m) 400 MW interconnector with Denmark by 2014. 

Statnett applied in late November for approval from Norway’s energy regulator 

NVE for what it describes as a strategic link that will strengthen power security 

between the two countries. The 240 km subsea link between Tjele in Denmark to 

Kristiansand in Norway would export surplus Danish wind-power output during 

blustery days and accept Norwegian hydroelectricity when wind speeds were 

low. Interconnectors are increasingly seen as a way to smooth out the variable 

nature of renewable energy. In late August, the European Investment Bank 

approved a €300m soft loan for the construction of a 500 MW link between 

Ireland and the UK. The largest interconnector in Europe, the 2,000 MW link 

between the UK and France, has been operating since 1986. 

Renewables fuel energy expansion 

Renewable energy generating capacity in the European Union (EU) may have 

grown by 13% in 2007, according to Eurelectric, but the truly significant figure 

in the European electricity industry association’s latest report is that almost half 

of total new generating capacity comes from renewables. Power generation 

capacity within the 27 members of the EU rose by 19.5 GW, or 2.5%, between 

2006-2007 to 795 GW. Of this 19.5 GW, the renewable energy sector accounted 

8.8 GW, or 45% of the increase in capacity. Most of the new renewable capacity 

coming onstream was from wind-power projects and to a lesser degree solar 

installations. Although fossil-fuel generation still forms the backbone of the 

European power system, renewable projects accounted for 55 GW of new 

capacity during 2000-07.


Europeans raise €600m 

European financial institutions have clubbed together to set up a pan-European 

equity fund with an initial capital of €600m ($888m). Known as the Marguerite 

Fund, the long-term investor fund will provide equity to transport, renewable 

energy and infrastructure companies and will, in the words of the European 

Investment Bank, act as a template for other funds that wish “to combine a 

market-based principle of return to investors with the pursuit of public policy 

objectives.” The fund hopes to raise €1.5bn in capital by the end of 2011. 

Portuguese launch $4bn US wind programme 

Portuguese energy group EDP Renewables (EDPR) unveiled plans in mid- 

November for an unprecedented $4bn windfarm expansion programme in the 

US over the next three years. At the moment, praise is being heaped on EDPR in 

the US for its commitment to wind-power expansion through its American 

subsidiary Horizon Wind Energy, which has developed more than 20 US 

windfarms totalling 3,400 MW of capacity. Horizon currently operates 2,500 

MW of wind-power in the US. With grants of up to 30% from the federal 

government’s Recovery Act, the EDPR expansion means rapid growth in windpower 

for the US and a substantial amount of local job creation. António Mexia, 

chairman of EDPR said: “There is no doubt that the right program was put into 

place at the right time. We are bringing new construction and permanent jobs to 

towns and cities of all sizes. We are installing equipment manufactured in the 

United States and we are also giving people new, clean energy choices.” 

Meanwhile … 

In the run-up to the Copenhagen summit: 

• UK Prime Minister Gordon Brown attacked “flat earth” climate change 

sceptics for doubting the evidence of global warming. 

• The Danish government passed emergency legislation removing value-added 

tax from carbon credit trading in order to prevent fraud. 

• The European Investment Bank approved loans worth €134m for four energysaving 

and renewable energy projects in China. 

Outlook 

The price of carbon in industrialised countries will have to reach around 

$50/t by 2020 and more than twice that by 2030, if they are to make 

sufficient cuts in emission levels to curb global warming, according to the 

International Energy Agency. In developing countries, which will need to 

invest $200bn/year to enable a shift from fossil fuels to renewable energy, 

prices would need to hit $30/t by 2020 and $50/t by 2030. The immediate 

outcome of Copenhagen won’t impact on the price of EU allowances, which 

were nudging €14.80/t in early December. The market now faces a possible 

wave of year-end selling by industrial companies which have delayed 

disposing of a large surplus of 2009 permits created in the main by a slump 

in demand for steel and cement.


Palm oil biodiesel, ($/tonne) 

1,000 

950 

900 

850 

800 

750 

700 

Jan-09 Apr-09 Jul-09 Oct-09 


Palm oil futures BMDB: 1st position, price per 

tonne 

Ringgit 

Dollars 

2,550 

750 

2,500 

730 

2,450 

2,400 

710 

2,350 

690 

2,300 

2,250 

670 

2,200 

650 

2,150 

2,100 

630 

09/11/2009 23/11/2009 07/12/2009 

Malaysian ringgit US dollars 


Asia, Africa and Pacific 

News 

• Dec 7 th : The European Union launched a €2.3m ($3.4m) project in Nigeria to 

use flared gas in a sustainable way. 

• Dec 4 th : Australian renewable energy group Carnegie Wave Energy 

completed an A$3.5m ($3.2m) share placement. 

• Dec 3 rd : The Asian Development Bank said it would spend $700m to help 

developing countries combat the effects of climate change. 

• Dec 2 nd : Leading Philippine renewable energy group Energy Development 

said it was buying two geothermal plants for $123m. 

• Dec 2 nd : The European Investment Bank agreed a €40m loan to FirstRand 

Bank to develop renewable energy projects in South Africa. 

• Dec 2 nd : The Tajikistan Government said it would impose a €460 levy on 

every family to help pay for the stalled Rogun dam on the Vakhsh River. 

• Dec 1 st : The Northern Territory Government in Australia received 17 

applications to drill for geothermal energy. 

• Nov 26 th : New Zealand energy group Meridian ordered 28 2.3 MW Siemens 

turbines for its Te Uku windfarm near Hamilton. 

• Nov 26 th : Sydney-based BioPower said it would work jointly on wave power 

projects with Spanish group Elecnor. 

• Nov 26 th : Huaneng Group of China said it will raise installed power 

generating capacity from renewable sources from 2GW to 5GW this year. 

• Nov 25 th : The Department of Energy in the Philippines said it was evaluating 

24 bids for 10 geothermal leases. 

• Nov 24 th : Japan said it would propose a carbon emission limit for shipping to 

the International Maritime Organization, to take effect from 2013. 

• Nov 23 rd : Kenyan Energy Minister Kiraitu Murungi said the country needs to 

invest $1bn in geothermal power projects over the next three years. 

• Nov 14 th : The Ethiopian Government inaugurated the 75 MW first phase of 

the 300 MW Tekeze hydroelectric scheme. 

Analysis 

Longyuan spreads the joy 

The Chinese may not have invented the idea of the company, but they are 

showing an adept understanding of how to run them and, more specifically, how 

to spread the joy of ownership. When China Longyuan Power Group, Asia’s 

largest wind-power group, sold 30% of its shares in an initial public offering 

(IPO) that raised HK$17.5bn ($2.2bn) in early December it was proof that 

renewable energy, capitalism and China go hand-in-hand. In a deal deftly 

handled by Morgan Stanley and UBS, the Hong Kong stock market IPO was 

well-priced and very well received. Plans to raise just $700m were originally 

unveiled in July but demand for the shares was much greater than expected and 

the underwriters scaled up the offering by a further $1.5bn. Proceeds of the share 

sale will fund the company’s expansion. By Q3 2009, Longyuan had a total of 

3,000 MW of wind-power capacity. The IPO comes at a time when China is 

increasingly viewed as a paragon of renewable energy investment. Consultants 

Ernst & Young reported in early December that China had overtaken Germany 

to become the second most attractive country after the US in which to invest in 

renewables. 

Shenyang in US move 

Following quickly on the heels of plans by Shenyang Power Group to develop a 

$1.5bn windfarm in the US, Nasdaq-listed Shenyang-based A-Power Energy 

Generation Systems revealed in mid-November it had signed an agreement with 

US Renewable Energy Group to build a wind turbine plant in the US to supply 

renewable energy projects in North and South America. The plant will 

manufacture 1,100 MW of wind turbine capacity annually and will employ up to 

1,000.


India sets wind and solar targets 

Eager to establish its renewable energy credentials before the Copenhagen 

summit, India set two ambitious targets for wind and solar power during 

November. In the middle of the month, the government approved a plan to build 

20,000 MW of solar power capacity by 2020 and a week later it announced 

plans to double wind-power generating capacity in the country to a similar 

20,000 MW level by 2022. Wind-power capacity currently stands at 10,500 

MW, which represents about three-quarters of all Indian renewable energy 

generation. The doubling of this capacity over the next decade will mean India 

will become one of the largest producers of wind-power in the world. 

Cambodia speeds up solar development 

Renewable energy companies are flooding into Cambodia after the government 

removed a 15% import duty on solar power components in August. Dr Sat 

Samy, energy minister, revealed in early December that two Japanese and 

Malaysian companies were about to begin development of solar projects and a 

further eight proposals were being evaluated. The Phnom Penh government sees 

solar power as a major factor in its plans for electrification of the countryside. 

Only 20% of the households are currently connected to the grid, with most of 

those located in cities and provincial towns. Energy demand in Cambodia, 

according to the Asian Development Bank, is set to grow at an annual rate of 

3.7% annually up to 2030. The Cambodia government is focussing on renewable 

power projects rated between 10 MW-50 MW capacity. 

Kenya sets sights on $2bn energy fund 

International agreement on a $2bn renewable energy fund has been reached in 

principle, according Kenyan finance minister Joseph Kinyua. By late November, 

support for the scheme had been given by the World Bank, Agence Française de 

Développement, KfW Bankengruppe, and the African Development Bank. The 

revolving fund will be used to finance private sector investment in geothermal, 

solar and wind projects as a means of reducing the country’s reliance on 

hydroelectric and fossil fuel generation. 

South Africans move on windfarm 

The development of 40 MW windfarm at Wittekleibosch in the Eastern Cape 

moved a step closer with the signing of a memorandum of understanding in 

early December between partners in the Tsitsikamma Community Wind Farm 

project. The scheme, which has an estimated cost of R1bn ($133m), is scheduled 

for completion 2013 but project partners are still waiting for a commitment from 

South African utility Eskom on the development of crucial infrastructure such as 

substations. Consortium partners include South African mining company Exxaro 

(which holds a 46% stake), South African energy company Watt Energy, the 

Tsitsikamma Development Trust, the Danish Industrialisation Fund for 

Developing Countries (IFU) and the Danish energy group European Energy. 

Kiwis agree emissions scheme 

A final two days of parliamentary scrutiny was enough to ensure the passage of 

a revised emissions trading scheme for New Zealand in late November despite 

criticism that the new law was a license to pollute by large companies. Climate 

Change Minister Nick Smith described the scheme, which was passed by a 63- 

58 vote with the backing of the small Maori Party, as “a critical and important 

first step in our nation’s effort to do our fair share in combating climate change.” 

The new legislation, which comes into effect in July, means there will be a price 

on carbon and an incentive for afforestation, Smith said. The revised emissions 

scheme includes a 30-month transition period during which polluters will have 

to meet just half of their obligations and have the option of paying a fixed price 

of NZ$25 ($17.80)/tonne of carbon. Total New Zealand emissions jumped 24% 

from 1990 to 2008.


And finally … 

• The Australian Senate rejected the government’s proposed emissions trading 

scheme, setting the stage for an early general election. 

• South Africa said it will cut carbon emissions to by 34% by 2020. 

Outlook 

Although Japan, China and India have much to gain by a workable climate 

change agreement, the social and economic costs to each are substantially 

different. This should not dissuade politicians from grasping the nettle of 

making a long-term irrevocable commitment to renewable energy and 

climate change management. Significant policy shifts will be necessary and, 

as in the case of Australia, new governments may have to be formed. This is 

a small price to pay for a longer-term goal of gaining the upper hand on 

global warming.


Technology & research 

News 

• Dec 4 th : Japanese electronics group Panasonic said it will invest $1bn in solar 

power and energy-saving products by 2012. 

• Nov 30 th : China announced plans to build a remote-sensing satellite receiving 

station in Antarctica to monitor the global ocean environment. 

Analysis 

New frontiers 

Space-based solar power took another tentative but genuine step forward in early 

December when the California Public Utilities Commission approved a 15-year 

electricity supply contract between technology start-up Solaren and one of the 

leading utilities in the state, Pacific Gas and Electric (PG&E). The power 

purchase agreement means that Solaren is now well placed to seek investors for 

the 200 MW orbiting power station, which hopes to generate 1,700 gigawatt 

hours of power annually from 2016. Although details of the rate that PG&E will 

pay remain confidential, Solaren said it would be above the Commission’s 

benchmark rate of 12.9 cents/kWh. The Commission said the agreement was 

“consistent with the state’s objective of increasing its reliance on a diverse 

supply of renewable energy resources and of supporting renewable technologies 

at reasonable costs and risks to ratepayers.” Founded by former employees of 

Hughes Aircraft, Boeing and Lockheed, Solaren was granted a US patent for the 

technology (No 7,612,284) in November. Central to the scheme is a 1km wide 

free-floating lightweight Mylar mirror that will reflect sunlight onto a smaller 

mirror, which in turn will focus the light onto photovoltaic modules. 

Boost for wind-power research 

US wind-power research received a further shot in the arm when the Department 

of Energy awarded grants in late November totaling $45m to Clemson 

University in South Carolina. Energy Secretary Steven Chu was in full flow 

when he announced details of the new test facility: “We are at the beginning of a 

new Industrial Revolution when it comes to clean energy and projects like these 

will help us get there faster.” The Large Wind Turbine Drivetrain Testing 

facility will be located at the Charleston Naval Complex, a former Navy base in 

North Charleston, and will conduct accelerated testing of onshore and offshore 

turbines with ratings off up to 15 MW. 

Norway trials osmosis plant 

Statkraft, the largest producer of renewable energy in Europe, started trial 

operations of a revolutionary prototype osmotic power plant in late November. 

The Norwegian state-owned company began generation of up to 4 kW of power 

(enough to boil a kettle) by mixing fresh water with seawater through a 

membrane, which creates higher pressure, which in turn can drive a turbine. 

“We believe osmotic power will be an interesting part of the renewable energy 

mix of the future,” Statkraft Chief Executive Baard Mikkelsen said at the launch 

of the scheme. The principle technical hurdle Statkraft is trying to resolve is 

increasing the efficiency of the membrane from the current 1 Watt per square 

metre to 5 Watts. Statkraft has estimated that a scaled-up plant capable of 

generating 25 MW of power would require 5m square metres of membrane, 

enough to cover an average football stadium. As any chemistry student will 

recall, osmosis can occur anywhere any time fresh water mixes with saline 

solutions, suggesting that the process could be more reliable than the intermittent 

nature of wind and solar power. 

Masdar looks for new cement mix 

Masdar, the Abu Dhabi developer behind the zero carbon concept of Masdar 

City, has launched a competition to create a sustainable method of producing 

concrete. First prize is a cash sum of $150,000 while a second $50,000 prize will 

be awarded for the lowest carbon footprint concrete mix. Specifically, the 

organisers are looking for: a process that will allow a minimum of 50kg/m 3 of


CO 2 reduction compared with a baseline mixture; concrete at an equal or lower 

unit cost of the baseline mix; improved workability; and an ability to produce 

500,000 m 3 annually. First requests for information must be submitted by 21 st 

December. Finalists will be selected by May, field trials will be conducted in 

June and the winners will be announced in September. Masdar has indicated it 

will follow up the concrete competition with a prize for designing a sustainable 

house. 

Chu offers $100m for research 

US Energy Secretary Steven Chu is looking for new cutting edge energy 

technology and earmarked $100m in early December to entice researchers to 

produce concept papers for three areas: fuel, carbon dioxide capture from coal 

plants and long-range electric batteries. An earlier phase of the research scheme 

resulted in funding for 37 innovative projects in energy storage, biofuels, 

carbon-capture, renewable power, building efficiency and vehicles. 

Patent pending 

The US Patent and Trademark Office began a push in early December to fasttrack 

reviews of patent applications dealing with the environment, renewable 

energy and reducing greenhouse gas emissions. It currently takes the patent 

agency an average of 40 months to make a final decision on green technology 

applications and it is hoped the new process will cut 12 months off the review 

phase. A pilot programme will focus on 3,000 patent applications which in order 

to qualify for a speedy review, must “materially contribute” to environmental 

standards or relate to renewable energy developments. The current total backlog 

of patent applications pending review exceeds 750,000.


Prices 

Crude oil, Nymex ($/barrel) 

90 

80 

70 

60 

50 

40 

30 

Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 


RBOB gasoline, ICE Futures US ($/gallon) 

2.30 

2.10 

1.90 

1.70 

1.50 

1.30 

1.10 

0.90 

0.70 

0.50 



Ethanol, CBOT ($/gallon) 

2.40 

2.30 

2.20 

2.10 

2.00 

1.90 

1.80 

1.70 

1.60 

1.50 



Biodiesel, Europe, FAME and RME (€/tonne) 

1,200 

1,100 

1,000 

900 

800 

700 

600 

500 

Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 

RME FAME 

Source: Reuters HBI 

Biodiesel price, Malaysia, PME ($/tonne) 

1,800 

1,600 

1,400 

1,200 

1,000 

800 

600 

400 

Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 

Source: Reuters HBI 

Corn, CBOT (c/bushel) 

500 

450 

400 

350 

300 

250 


Source: Reuters Ecowin


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