An Ignoble Experiment

2. U.K. government commitment to wind a catalyst for meeting EU targets

In July, using the U.S.-flagged, 110-foot long lift vessel called the Inez Eymard, Dominion Virginia Power (DVP) will be taking core samples of the ocean floor in an effort to move ahead its proposed offshore wind turbine project ahead which would be located 27 miles off the coast of Virginia Beach.

The Inez Eymard. Credit: Dominion

Dominion has received two Department of Energy grants totaling $51 million for its wind turbine demonstration project -- part of the Virginia Offshore Wind Technology Advancement Project (VOWTAP). If the project is approved, the company plans to build two 6 MW turbines and test design features intended to lower the cost of construction, reduce maintenance and withstand hurricane-force winds.

Dominion also holds the lease on 112,800 acres of commercial wind area adjacent to the demonstration project. The company intends to use lessons learned from the demonstration turbines to guide the development of up to 2,000 MW of wind turbine energy.

In order to provide a stable platform for collecting the core samples DVP needs for the demonstration project to move forward, the Inez Eymard literally lifts itself out of the water to collect the samples and will conduct borings off Camp Pendleton anywhere from 300 to 3,300 feet from the shoreline to collect data for the design of the underground electric distribution line.

"This proposed project provides a very interesting opportunity to develop renewable offshore wind energy for Virginia," said Paul Ruppert, DVP's senior vice president of Business Development and Generation Construction. "Both the demonstration project and the commercial venture tie into our strategy of promoting a diverse generating mix that includes nuclear, natural gas, coal, hydro, solar and sustainable wind while providing our customers with reliable and affordable electricity."

The four borings at the turbine site will be collected approximately 330 feet below the ocean floor. The samples will be used to determine soil characteristics, such as composition and strength, to finalize the design of the wind turbine foundations.

Near shore, the vessel has finished two borings and has nine more to complete. The samples will be used to finalize the installation plan of the underground distribution line that will run from the turbines to Camp Pendleton, where they will be connected to Dominion's electrical grid. Each of these borings will be obtained approximately 80 feet below the ocean floor.

Although Dominion still needs to obtain several regulatory approvals, if these occur by mid-2016, major construction would occur in 2017 and the wind turbines would begin operating later that year.

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By Barbara Vergetis Lundin

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3. DC Water liquidates green century bonds

The U.K. government has taken steps to reduce the country's carbon emissions by 34 percent by 2020 and 80 percent by 2050, compared with 1990 levels, according to a report by research and consulting firm GlobalData. At the same time, the U.K. is striving to meet its EU target of 15 percent renewable energy consumption by 2020.

Renewable energy sources are being promoted by the U.K. government through substantial financial support, according to GlobalData, by way of subsidies, active research and development, government-sponsored loans, and tax allowances.

"In 2009, the UK Renewables Energy Strategy set a target of generating more than 30 percent of electricity from renewable energy sources by 2020, with technologies such as wind, biomass, hydro, wave and tidal playing important roles," said Prasad Tanikella, GlobalData's senior alternative energy analyst. "The other main aims were to generate at least 12 percent of heat from renewable energy sources, such as biomass, biogas, solar and heat pumps, and to derive at least 10 percent of transport energy from renewable sources."

Within the Department of Energy & Climate Change (DECC), an Office for Renewable Energy Deployment was created to take these commitments forward, developing in 2011 a renewable energy roadmap to assess the status of renewables in the United Kingdom. This included up to $45.24 million of direct government support for offshore wind cost reductions over the subsequent four years.

"Wind power installed capacity accelerated from 534 megawatts in 2002 to approximately 8.9 gigawatts in 2012 -- and is expected to increase further, reaching almost 31.6 gigawatts by 2020, at a Compound Annual Growth Rate of 16.9 percent," said Tanikella. "The U.K.'s rapid expansion of wind power installations is largely thanks to favorable government policies and attractive concession programs, such as the Offshore Transmission Owner policy in 2009 and the Offshore Wind Cost Reduction Task Force in 2011."

For more:
- see the renewable energy roadmap

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By Barbara Vergetis Lundin

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4. Brazil's ambitious solar plan

The District of Columbia Water and Sewer Authority (DC Water) has issued $350 million in taxable, green century bonds. The 100-year final maturity represents the first municipal century bond issued by a water/wastewater utility in the United States. It also represents DC Water's inaugural green bond issue and the first "certified" green bond in the U.S. debt capital markets with an independent second party sustainability opinion.

The Blue Plains Tunnel is part of DC Water's Clean River Project, a massive system that will significantly reduce water pollution in the region's waterways. Credit: DC Water and Sewer Authority

Proceeds from the century bonds will finance a portion of the $2.6 million DC Clean Rivers Project -- a massive effort to construct a deep tunnel system that will transport combined storm water and sewage to DC Water's Blue Plains Advanced Wastewater Treatment Plant, significantly reducing combined sewer overflows (CSO) to area waterways. The issuance achieved its green certification based upon the project's environmental benefits, which include improving water quality by remediating CSOs, promoting climate resilience through flood mitigation, and improving quality of life through promotion of biodiversity and waterfront restoration.

DC Water has typically issued 30- to 35-year tax-exempt municipal bonds to fund its capital improvement projects, reflecting the anticipated useful life of the assets. In the case of the Clean Rivers Project, DC Water is financing a portion of the construction costs with a century bond to better match the useful life of the tunnel systems, which are expected to last for at least 100 years.

"The responsibility of a Chief Financial Officer is to secure the funding necessary to undertake the work of the enterprise," said DC Water CFO Mark Kim. "We also need to formulate a financing strategy that both matches the lifespan of our assets with their funding stream and that presents an equitable charge to our ratepayers. We developed this innovative approach to achieve all these goals."

DC Water chose to issue century bonds because they allow for asset-liability matching where the authority can match its long-lived assets and liabilities on its balance sheet, as well as take advantage of historically low interest rates and lock-in funding costs for a very long-lived asset. Further, century bonds spread the costs of the project more equitably to those who will benefit over the next 100 years.

The $350 million taxable, senior lien, fixed rate century bonds were sold via negotiated sale. Favorable market conditions and strong investor demand enabled DC Water to upsize the transaction by $50 million from an initial offering size of $300 million. The century bonds were offered at an interest rate of 4.814 percent with a final maturity of 2114.

DC Water also intends to price $100 million of tax-exempt, subordinate lien, variable-rate demand bonds during the week of July 21, 2014, bringing the total sale to $450 million.

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- see this article

Read more about: green century bonds, DC Water
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By Barbara Vergetis Lundin

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5. Global CAPEX to top $300B by 2020

Brazil's ambitious plan to auction 3.5 GW of photovoltaic (PV) capacity through 2018 is expected to catalyze solar growth in Latin America, according to IHS Technology. The Brazilian Electricity Regulatory Agency has announced a so-called reserve capacity auction to contract new power-generation capacity to hedge against unexpected drops in power supply -- for example, low hydroelectric power levels during drought years.

Credit: IHS

Extreme drought conditions have challenged Brazil's electricity supply and forced an increase of costly thermal power generation. As peak wholesale power prices top $400 per MWh, alternative sources of generation have become attractive options in the short term.

October's auction will offer separate categories for different technologies. This approach will benefit the PV market compared to the regular new-capacity auctions, where multiple renewable power technologies compete, giving an advantage to wind. Exactly how much capacity will be awarded has not yet been disclosed, but IHS expects about 500 MW to be available for PV projects in the first round. The ceiling price for bids for the 20-year power purchase agreement (PPA) is likely to be set at approximately RS250 per MWh, or $112 per MWh.

"Bids will be highly competitive. We expect bid prices to fall to less than RS200 per megawatt-hour, in line with offers from previous Brazil auctions where solar failed to compete with wind," said Josefin Berg, senior analyst for solar demand at IHS. "Markets like Brazil that combine high solar resources and elevated power prices create opportunities for PV. The main constraint in Brazil is the price uncertainty in long-term power, tied to meteorological factors; revenue levels cannot be guaranteed without a PPA."

In light of recent announcements, IHS has increased its installation forecast for the country, and predicts that the annual installed solar capacity for Brazil will rise to 1,023 MW in 2018 -- up from 167 MW in 2013.

IHS expects competition for PV projects in the reserve capacity auction to be tough contenders. As an indicator of the PV project pipeline in Brazil, about 6.1 GW worth of PV projects have registered for September's new capacity auction.

In the October reserve capacity auction, locally established utilities and independent power producers (IPP) are best positioned to offer sufficiently low bid prices to take home the bulk of awarded PV capacity. CPFL, the largest utility not owned by the government, has a PV pipeline of nearly 600 MW, while wind-focused IPP Renova Energia has claims to bids of a combined capacity amounting to 240 MW, according to IHS.

Of the international power producers already established in Brazil, GDF Suez has installed a 3.5 MW solar plant, and Enel was awarded 15 MW in the February Pernambuco PV tender.

Overall, IHS anticipates that Brazil's installed PV capacity will grow from 39 MW to 1.2 GW by the end of 2016, with the main share in utility-scale projects as awarded in national and regional auctions.

As for commercial and residential PV, IHS says that, despite a net-metering scheme being in place, deployment remains limited by tax challenges and low visibility on retail power prices that do not reflect the real power generation costs.

For more:
- see this article

Related Article:
U.S. leading the Americas' solar capacity

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By Barbara Vergetis Lundin

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