Global Investment In Wind And Solar Energy Is Outshining Fossil Fuels
In 2016, about $297 billion was spent on renewables—compared with $143 billion on new nuclear, coal, gas and fuel-oil power plants. Global Investment In Wind And Solar Energy Is Outshining Fossil Fuels
Global spending on renewable energy is outpacing investment in electricity from coal, natural gas and nuclear power plants, driven by falling costs of producing wind and solar power.
More than half of the power-generating capacity added around the world in recent years has been in renewable sources such as wind and solar, according to the International Energy Agency.
In 2016, the latest year for which data is available, about $297 billion was spent on renewables—more than twice the $143 billion spent on new nuclear, coal, gas and fuel oil power plants, according to the IEA. The Paris-based organization projects renewables will make up 56% of net generating capacity added through 2025.
Once supported overwhelmingly by cash-back incentives, tax credits and other government incentives, wind- and solar-generation costs have fallen consistently for a decade, making renewable-power investment more competitive.
Renewable costs have fallen so far in the past few years that “wind and solar now represent the lowest-cost option for generating electricity,” said Francis O’Sullivan, research director of the Massachusetts Institute of Technology’s Energy Initiative.
This is beginning to disrupt the business of making electricity and manufacturing generating equipment.
Both General Electric Co. and Siemens AG are grappling with diminished demand for large gas-burning turbines and have announced layoffs. Meanwhile, mostly Asian-based manufacturers of solar panels are flourishing.
In many places, opting for renewables “is a purely economic choice,” said Danielle Merfeld, the chief technology officer of GE’s renewable energy unit.
“In most places, it is cheaper and other technologies have become more expensive.”
Sustained government support in Europe and other developed economies spurred the development of renewable energy. But costs have fallen for other reasons. China invested heavily in a domestic solar-manufacturing industry, creating a glut of inexpensive solar panels. Innovation helped manufacturers build longer wind-turbine blades, creating machines able to generate substantially more power at a lower cost.
Renewable-energy plants also face fewer challenges than traditional power plants. Nuclear-power plants have been troubled by mostly technical delays, while plants burning fossil fuels face regulatory uncertainties due to concerns about climate change. And pension funds, seeking long-term stable returns, have invested heavily in wind farms and solar parks, allowing developers to get cheaper financing.
“It is just easier to get renewables built,” said Tony Clark, a former member of the Federal Energy Regulatory Commission. “There is that much less opposition to it.”
The sustained investment is reshaping how the world’s homes and industries are powered. Last year, the percentage of electricity from renewable sources reached 12.1%, more than double that of a decade earlier, according to a joint report by the Frankfurt School of Finance & Management and the United Nations Environmental Program. These figures don’t include electricity from large hydroelectric dams.
The rise of renewable power generation is raising concerns and sparking a political backlash in the U.S.
The Trump administration is weighing actions to subsidize the operation of coal and nuclear plants, arguing that these units are needed for the reliable operation of the power grid.
The proposal, which follows a request for relief by First Energy Corp., an Ohio-based owner of coal and nuclear plants, would hurt renewables and natural gas-fired plants, which have boomed in recent years as the fuel has become cheaper and more plentiful thanks to fracking. An unusual alliance, including renewable-energy groups and the oil-and-gas-industry’s American Petroleum Institute, have challenged whether any government aid is really needed.
In the U.S., more than two decades of government tax credits, some of which will soon go away, have propelled renewables. About 17% of the country’s electricity last year came from renewable sources, including wind, solar and hydroelectric dams, according to federal data. The government said that just under half of large-scale power generation added was renewable last year.
Last week, Xcel Energy Inc. announced a $2.5 billion plan to add 1,800 megawatts of new wind and solar generation, plus a substantial amount of batteries to store the power. The plan, which needs to be approved by state regulators, would retire 660 megawatts of coal-burning generation and result in savings for consumers, the Minneapolis-based utility said.
“I think, across the nation, you could get to 40% renewable energy,” said Xcel Chief Executive Ben Fowke. “Ten years ago, I would have told you 20% was the max.”
Renewable-energy prices are now competitive with fossil-fuel generation in many places. In 2017, the global average cost of electricity from onshore wind was $60 per megawatt hour and $100 for solar, toward the lower end of the $50 to $170 range for new fossil-fuel facilities in developed nations, according to the International Renewable Energy Agency.
The combination of falling costs and large pools of available capital is also spurring renewables growth in developing countries.
In November, Italy’s Enel SpA, a global energy company, won a bid to build power plants in Chile in an auction open to both renewable and fossil-fuel generators. Enel will build wind, solar and geothermal facilities and sell power from the facilities at about $32.50 per megawatt hour, an unsubsidized rate that is lower than the cost of natural gas or coal to burn in existing plants.
Recent power auctions have suggested that renewable energy prices have further to fall. Earlier this year, an auction in Saudi Arabia awarded a contract to build a 300-megawatt solar facility for $17.90 a megawatt hour. Very low labor costs in the Middle East and India are resulting in record-breaking low bids for solar.
A Mexican auction last year drew international bids for power at an unsubsidized price of below $21 per megawatt hour. That was substantially below the spot market price for electricity, which averaged around $70 per megawatt hour last year, said Veronica Irastorza, an associate director of economic consulting firm NERA and a former Mexican undersecretary of energy planning.
“Renewables are going to be able to compete with thermal plants. They will be incorporated into the system faster than I thought five years ago,” she said.
In Canada, an auction in Alberta in December awarded four wind contracts for an average of $37 a megawatt hour, subsidy-free. The Albertan government planned to award contracts for only 400 megawatts, but bumped it up to 600 megawatts when it saw the prices offered, which were slightly below the average price for electricity on the province’s grid in 2018.
In India, the push into solar has been driven partly by a desire for cleaner energy sources, but also because there is more financing available for solar than for coal, said Rahul Tongia, a fellow at Fellow at Brookings India in New Delhi.
Renewable output varies, based on when the sun is shining and wind is blowing, and cannot always be dispatched when needed like a coal or gas plant. That can pose a challenge to grid operators.
But industry observers say that is now a concern only in certain markets, such as California, where renewable penetration is at its highest.
“We could see aggressive build rates for several years to come before we see issues in many markets,” said Tom Heggarty, an analyst with energy consultant Wood Mackenzie. “Ten, 20 years down the line, it might be a different story.”
The Next Frontier for Electric Vehicles: Deep Underground
To improve air quality and reduce emissions, mining companies aim to shift away from diesel equipment.
The next boom in electric vehicles could be the world’s mining fleet.
From rural Canada to Australia’s dusty Outback, companies are swapping out diesel-fueled drills, loaders and utility vehicles for equipment powered by lithium-ion batteries. They are looking to reduce emissions and eliminate the exhaust fumes that foul the underground air and risk miners’ health.
Around 35 electric vehicles are at work at Newmont Goldcorp Corp. ’s Borden mine near Chapleau, Ontario, unearthing ore or ferrying workers around the site, which began producing commercial volumes in October. Newmont wants the mine to go all-electric. An electric production drill will arrive early next year, a spokesman said, and diesel haul trucks are likely to be phased out.
“The Holy Grail is a haul truck,” said Kirsten Rose, who oversees low-emission technologies at BHP Group Ltd. , the world’s largest mining company by market value. These heavy-duty trucks carry tons of ore out of the bottom of pits, and with current technology, matching the power of their diesel engines would require an enormous battery pack.
BHP has been testing a light electric vehicle over the past year at Olympic Dam, Australia’s largest underground mine, and this month it will add another. The company intends to expand the trial to other Australian mines. In Canada, workers planning BHP’s Jansen potash project are assessing how many electric vehicles could be deployed if it goes ahead.
The aim is one day to eliminate all diesel-powered machines from mine sites, Ms. Rose said.
Smaller rivals are also stepping up efforts to go green. Among them, Nouveau Monde Graphite Inc. is planning an all-electric open-pit graphite mine in Quebec.
At Fortescue Metals Group Ltd. , one of the world’s top suppliers of iron ore, CEO Elizabeth Gaines said, “We’re always looking at opportunities to replace diesel.” But “the technology—the battery life—isn’t quite there yet for our operations,” she said.
The technology is advancing rapidly, but that can present another challenge: “It’s like laptops,” said Drew O’Sullivan, who is leading BHP’s trial at Olympic Dam. “By the time you get it home, it’s outdated.”
The purchase price is a further hurdle. Electric vehicles for use in mines cost from 40% more than to three times as much as diesel-powered ones, experts say.
Proponents counter that running costs are lower. Borden’s annual energy expenses should be lower by roughly US$9 million—possibly more—than a traditional mine’s, the Newmont spokesman said. One factor in that: As much as 40% of an underground mine’s energy costs are tied to powering giant ventilation systems to extract pollutants from tunnels.
Customers and investors are pushing for global resources companies to clean up their act. With a growing focus on the social impact of investments, many big pension funds and asset managers, as well as project financiers, are pressing miners to disclose and reduce their carbon footprints. Diesel is a ripe target: It accounts for more than one-third of BHP’s direct operational emissions, Ms. Rose said.
Regulators may soon join in the push. In July, the mines department of Western Australia state raised fresh concerns about the health of workers who spend up to 12 hours a day guiding heavy machinery around subterranean labyrinths.
“Diesel-engine exhaust is a known hazard for mining operations, especially in underground mines,” said Andrew Chaplyn, the department’s director of mines safety. A government committee is drawing up recommendations for the state’s mines minister.
Within a few years, diesel machinery will likely no longer be used at new underground mines in Australia, while being phased out at others, said Sherif Andrawes, global head of natural resources at accounting and advisory firm BDO.
“I think what we are seeing now is the start of something quite big,” he said.
Rio Tinto PLC, the world’s second-biggest miner by market value, is even studying the potential for hybrid engines on its heavy-haul railway trains. Ian Vella, who oversees rail services for Rio Tinto, is excited about the regenerative-braking aspect.
“Imagine a giant battery on one of those locomotives that is taking energy from the train as it is braking, storing it, and then it can use it when it needs power on the network,” he said.
Still, electrifying mine fleets won’t do much to cut the industry’s overall emissions without a shift away from fossil fuels to renewable power for generating electricity.
Some miners are moving in that direction. Last month, Fortescue struck an agreement with electricity generator Alinta Energy to help power its Chichester iron-ore production hub with solar energy, displacing roughly 100 million liters of diesel annually.
Warren Buffett Is Making A Big Bet On Solar Power
Warren Buffett is betting on solar power, with one of Berkshire Hathaway’s (BRK.B) companies behind a project to build the largest solar power plant in the U.S.
Berkshire subsidiary NV Energy will be using the electricity generated by a 690-megawatt solar-energy plant to be built on federal land in Nevada. The current record for a solar plant is 579 megawatts.
On Monday, the Bureau of Land Management released an environmental-impact statement about the project, indicating that it would approve the project after a 90-day period for public comment, as first reported by the Los Angeles Times. While the Trump administration hasn’t been friendly to solar power, opposing a plan last year to extend tax incentives, a federal official praised the Berkshire project as being part of an “America First Energy Plan,” echoing nationalist rhetoric the president has used to describe other parts of his agenda.
The so-called Gemini project, which will generate power for NV Energy companies but will be developed by third parties, will be 25 miles from Las Vegas. That project and two others will create 1.19 gigawatts of new power for NV, enough to provide electricity to 230,000 homes. The projects also come with 590 megawatts of battery-storage capacity, meaning the power generated by solar panels can be stored for times when the sun isn’t shining.
Buffett said in a 2016 investor letter that he was convinced renewable sources would grow in importance, which is why the company’s Berkshire Hathaway Energy subsidiary was investing in them. “Last year, BHE made major commitments to the future development of renewables in support of the Paris Climate Change Conference,” he wrote. “Our fulfilling those promises will make great sense, both for the environment and for Berkshire’s economics.”
Buffett’s commitment to environmental goals has been challenged in the past. Berkshire Hathaway Energy was previously criticized for opposing “net metering” rules that pay rooftop solar generators for the power they send back into the grid. Without net metering, rooftop-generated solar energy is less cost-competitive in many states. Some environmentalists have also criticized the Gemini project because of its impact on wildlife, including tortoises in the area.
Regardless of the environmental debates, Berkshire’s embrace of solar energy makes it clear that the technology is becoming progressively more cost-competitive with fossil-fuel-driven power. The Gemini project will cost $38.44 per megawatt hour under a 25-year contract, the L.A. Times reported, while Lazard has calculated that the average national cost of a new natural-gas plant ranges from $44 to $68.
State mandates are helping drive wider adoption of renewable energy. Nevada has mandated that utilities get at least half their power from renewables by 2030. Companies that have embraced renewables have seen their stock prices rise. NextEra Energy (NEE), a utility company that has taken a lead role in developing renewable projects, trades at 27 times 2020 earnings expectations, while competitors trade at less than 20 times. Utilities that aren’t investing as heavily in renewables are likely to continue to be left behind.
Can Solar Power Compete With Coal? In India, It’s Gaining Ground
Electricity from sunlight costs less, a hopeful sign for developing nations building out their power grids.
In a dusty northwest India desert dotted with cows and the occasional camel, a solar-power plant is producing some of the world’s cheapest energy.
Built in 2018 by India’s Acme Solar Holdings Ltd., it can generate 200 megawatts of electricity, enough to power all the homes in a middle-size U.S. town. Acme sells the electricity to distributors for 2.44 rupees (3.4 cents) a kilowatt-hour, a record low for solar power in India, a country that data trackers say has the world’s cheapest solar energy.
More remarkable, the power costs less to generate in India than the cheapest competing fossil fuel—coal—even with subsidies removed and the cost of construction and financing figured in, according to the Indian government and industry trackers.
Price-conscious Indian utilities are eager to snap up that power. “We are infamous for low cost,” says Sandeep Kashyap, Acme’s president.
Solar power has entered a new global era. The industry was long dependent on subsidies and regulatory promotions. Now, technological innovation and falling solar-panel prices have made solar power inexpensive enough to compete on its own with other fuel sources in some regions, when it comes to newly built plants.
That could turbocharge growth of renewables in the global energy industry, especially in fast-growing Asian markets where much of the world’s energy infrastructure expansion will take place.
Governments in many solar markets—including China, the biggest—are phasing out or reducing supports. Solar-plant development is going mainstream, with finance provided by global investors like Goldman Sachs Group Inc., Singaporean sovereign-wealth fund GIC and huge Western pension and private-equity funds.
So far, the renewable-energy push hasn’t halted the growth of global energy emissions. But the success of countries like India in feeding their rising power demands with clean energy will still be key to blunting the growth of global challenges like pollution and climate change.
The price declines in solar panels and the power they produce are jolting the industry. In the past decade, solar has grown from less than 1% of the world’s electric-power capacity to an estimated 9% by the end of this year, according to the International Energy Agency, an intergovernmental organization focused on energy policy.
By 2040, the IEA expects that to grow to 24%, which would make solar the largest single energy source.
India is at the forefront of the trend, with a cost of building solar capacity that has dropped 84% in eight years, according to the International Renewable Energy Agency, an intergovernmental organization focused on renewable energy. Other countries are close behind, with costs falling fast in Australia and China.
India has increased the amount of solar power it has installed 10-fold in the past five years, to 32 gigawatts, and the government is hoping to triple that in the next few years—one of the fastest paces of growth anywhere. India’s prime minister last year said he wants 450 gigawatts of renewable energy including solar installed by 2030.
If India manages that, which many analysts say is a real stretch, it would account for nearly all the additional electric capacity the country’s Central Electricity Authority has projected it would add by then, and more than the country’s total from all power sources now.
India has pledged as a climate goal that 40% of its electric capacity will come from non-fossil fuels by 2030; the latest renewable targets would likely put that percentage at over half.
Cheaper Than Coal
In 2018, India’s “levelized” cost of solar-power generation—an analysis removing the impact of direct subsidies and figuring in the costs of construction and financing for a new plant—fell to 14% below that of coal, the first time anywhere in the world that generating solar was cheaper than coal on that basis, according to international energy consulting firm Wood Mackenzie.
India’s national energy plan doesn’t anticipate construction of new coal power plants for at least several years. Even state-controlled Coal India, one of the world’s largest coal-producing companies, in November said it planned a pilot solar project as it navigated a future with less coal.
Across Asia, a region expected to account for two-thirds of the world’s new power demand during the next two decades, price declines will make wind and solar combined 17% cheaper than coal by 2030 on a levelized basis, says Wood Mackenzie. In India, solar generation will be almost 50% cheaper, it projects.
“This is a revolution in power generation costs,” says Wood Mackenzie analyst Alex Whitmore. “What it means is there will be a lot more solar investment in India, and in countries like India.”
Solar’s big problem: It generates power only when the sun shines. Wind power, similarly, works only with wind. So displacing fossil fuels could require cheaper ways to store energy. And the more renewables in the power-transmission grid, the more the grid will need to be rebuilt to accommodate those special characteristics.
That inefficiency is why the IEA forecasts the amount of power solar generates to rise to only 11% of the world’s total by 2040, around half that of coal or natural gas.
In India, which has some of the world’s best conditions for generating solar power, the mismatch is pronounced because demand for electricity swells after people go home and switch on air conditioners in the evening, when solar plants aren’t working.
Meanwhile, countries like India have made massive investments in coal-fired plants they can’t afford to simply scrap. Coal still provides two-thirds of India’s power. Coal shipments also underpin profits at the nation’s biggest employer, the railways.
As Indian solar developers push prices down, the thin margins for many are being pummeled by challenges ranging from an economic slowdown and tighter domestic financing conditions to power distributors that aren’t paying bills and squatters refusing to move off land slated for development.
During the past two years, the pace of solar development in India slowed. Although installations are expected to pick back up this year, many analysts and industry leaders now expect India won’t hit its aggressive solar goals.
Challenges will likely multiply when solar power in India’s grid rises from the current 9% to around 20% or 30%—a level at which it may start replacing conventional power plants, say experts like Rahul Tongia, a fellow at the India arm of think tank Brookings Institution.
“What happens after that point when the low-hanging fruit is done?” says Mr. Tongia.
India’s solar push started in 2010, when its government outlined plans for a modest boost in capacity during the next decade. Solar was a good fit for India’s growing energy needs.
Plants are easy to build—essentially solar panels lined up in racks—and labor is inexpensive. India has big stretches of sparsely populated land and intense sun, good for vast spreads cranking out power.
In 2015, Prime Minister Narendra Modi quintupled the country’s solar target, aiming to install 100 gigawatts of capacity by 2022—roughly half of the world’s 2015 total. At the time, India had less than 3 gigawatts of solar power installed and the plan seemed crazy.
“It was a leap of faith,” says Anand Kumar, a top official in India’s Ministry of New and Renewable Energy. “We got very lucky that the price of solar panels fell.”
China had been cranking out solar panels in massive numbers in a government-subsidized effort to dominate the industry globally. Panel prices, which can account for around half the cost of a solar plant in India, plummeted.
Globally, solar-panel prices fell more than 90% during the past decade, according to the International Renewable Energy Agency.
The Indian government’s system of auctioning out solar projects to developers that offered the cheapest electricity reduced prices there further. Aggressive entrepreneurs elbowed in, figuring the government’s eagerness to boost solar capacity coupled with ever-cheaper panels offered a profit opportunity.
Japan’s SoftBank Group Corp., whose chief executive, Masayoshi Son, is a solar proponent, set up an energy unit in Delhi around the same time Mr. Modi announced his ambitious goals. SoftBank snagged its first solar project in half a year.
Acme switched its focus to solar from telecom equipment, figuring the industry was poised to repeat telecom’s rapid growth. ReNew Power Ltd., founded in 2011, enlisted a roster of blue-chip investors including Goldman, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority.
As the government tendered hundreds of megawatts of solar capacity, the price at which solar developers were offering to sell their electricity roughly halved between 2015 and this year, according to Bridge to India, a data tracker.
Developers pushed to squeeze all the profit they could from projects. In the Bhadla solar park, where the Acme plant producing the cheap electricity is located, one problem is dust.
The plant has 927,180 panels stretched over desert where sandstorms are common and temperatures can swing from over 120 degrees Fahrenheit in summer to nearly freezing in winter. If panels aren’t cleaned regularly, dust collects and electricity production declines.
Acme had used sprinklers on tractors driven by contractors to wash down the panels, a method letting them clean all panels three times a month. Last year, it rolled out robots that brush the panels down, doubling the monthly cleaning and boosting the maximum amount of energy the plant could produce.
As solar prices sank, some projects were delayed by a lack of transmission lines to ship the electricity. Others fell behind because of tussles between villagers, developers and local governments over land—issues dogging development in other countries as well.
Acme and other developers have been hamstrung by a delay in tax and tariff refunds they had counted on. “A lot of equity got stuck, which was planned for new projects,” says Mr. Kashyap, Acme’s president.
ReNew and other companies have been hit by payment delays from India’s struggling power distributors, mainly state-owned companies that buy electricity from producers and sell it to households. India’s Central Electricity Authority estimated that as of Nov. 30, renewable-energy companies were owed some $1.3 billion in overdue bills.
At any one time, distributors in roughly a quarter of the eight or nine states that ReNew Power operates in are behind on payments, says CEO Sumant Sinha. Although ReNew and other developers factor such payment delays into electricity prices they offer when bidding for projects, a miscalculation could hit profits. “Everyone sees delays in payments,” he says.
Some Indian state agencies, hoping solar prices fall lower, have canceled solar auctions when they thought developers were offering to sell power at too high a price.
Last year, the southern state of Andra Pradesh —which has one of the highest levels of renewable-energy consumption as well as one of the largest unpaid bills—threatened to cancel old solar contracts and renegotiate them at lower prices, sending the industry into an uproar.
The Andra Pradesh government says paying those higher prices has left its electricity distributors in financial distress, and that it is trying to “persuade” renewable-energy generators to supply power “at a mutually beneficial rate.”
By early 2019, many developers were starting to pass on solar auctions, threatening the country’s aggressive development timetable. Many developers and analysts now say India is likely to fall behind in achieving its renewable-energy goals.
India is working to remove roadblocks, building more transmission lines and tweaking rules governing auction, development deadlines and solar parks to make it easier to build plants. It is holding auctions for projects bundling solar with wind power and electricity-storage capacity to help even out solar generation’s peaks and troughs. ReNew recently won one such contract.
And India is considering projects that bundle existing coal plants with renewable-energy sources, to help smooth the transition from fossil fuels, says Mr. Kumar, the renewable-energy official.
Experts like ReNew’s Mr. Sinha say it will likely be several years before India builds so much solar capacity that the technology’s daytime power surges and nighttime plunges could affect the country’s overall electricity supply. By that time, says Mr. Sinha, other new technologies such as batteries and systems for shipping electricity may be available to smooth out irregularities.
India has already shown it can expand its solar capacity far faster than anyone would have expected, he says: “That is not an achievement to be scoffed at.”
U.S. Approves Giant Solar Project In Nevada
Gemini project will have capacity to power all Las Vegas homes.
The Interior Department has given final approval for what it says will be the largest solar-power project in the U.S., a $1 billion installation in Nevada that could power about 260,000 households—enough to cover the residential population of Las Vegas.
The project has financial backing from NV Energy Inc., a unit of Warren Buffett’s Berkshire Hathaway Inc., and Quinbrook Infrastructure Partners, a private-equity firm. The two firms signed a 25-year deal last year to take the solar farm’s output of 690 megawatts.
Major business consumers have been clamoring for more wind and solar power to help slow climate change and lower bills. Nevada last year joined several states that have passed laws committing to emissions-free power, mandating that half of its electricity must come from renewables by 2030.
Interior Secretary David Bernhardt signed approval Monday for what is called the Gemini Solar Project to go forward on 7,000 acres of federal land in the desert 33 miles northeast of Las Vegas, the Interior Department said.
It touts the project as a boon to the economy and the environment, with the potential to employ up to 900 construction workers and produce emissions-free power to offset the greenhouse-gas output of 83,000 cars.
“That project would be a major producer of energy,” Mr. Bernhardt said. “I’m glad that we’re getting this out, and it’s really part of our effort to foster jobs.”
Construction was originally set begin one month after final approval, with the first phase expected to be completed within a year, and full operation by 2023. Mr. Bernhardt warned, however, that the coronavirus pandemic might delay that timeline.
While President Trump has shrugged off dire scientific warnings about global warming, the administration has also proposed cutting red tape on environmental reviews and says Gemini fits with its priority of facilitating investment in important infrastructure projects.
Gemini is unique among the country’s largest solar projects in that it includes major battery capacity to keep feeding the grid overnight, an emerging trend among new solar projects, according to an arm of energy-consulting firm Wood Mackenzie.
“It’s just a monstrous project,” said Colin Smith, an analyst at Wood Mackenzie. “I see it as the next step. We’re going to keep seeing bigger and bigger solar.”
Berkshire is also invested in the biggest operating U.S. solar farm, Solar Star, a 586-megawatt project outside Los Angeles. Its offtake partner on Gemini, Quinbrook, focuses on lower carbon and renewable-energy infrastructure, with offices in Houston, the U.K. and Australia.
World’s Largest Wind Turbine Maker Vestas Hits Record High As U.S. Demand Drives Sales
Vestas Wind Systems’s stock hit record highs on Tuesday, as strong U.S. demand for wind turbines drove surging sales in the second quarter.
The world’s largest wind turbine manufacturer restored its full-year guidance as sales rose to €3.5 billion—a 67% increase compared with the same period in 2019—driven by a higher volume of wind turbine deliveries in the U.S.
The company’s combined order backlog—for wind turbines and service contracts—climbed to record highs of €35.1 billion at the end of June, as high demand for renewable energy continued. Chief Executive Henrik Andersen said its service segment “played a key role in ensuring stable and renewable energy supply during lockdowns across the globe,” growing 6% with high margins in the quarter.
The Danish company restored the full-year guidance it scrapped at the height of the pandemic in April, expecting revenue of €14 billion to €15 billion. However, it expected an earnings before interest and taxes margin of 5-7%, down from a previous forecast of 7-9%, and total investments would now be lower than the initial €700 million target in 2020.
Vestas swung to a quarterly net loss of €7 million, from a profit of €90 million a year earlier, and below the FactSet consensus of a €75 million profit. Earnings were hit by a one-off cost of €175 million to repair and upgrade older wind turbine blades, while logistical costs were also increased by the coronavirus pandemic.
Despite the loss, the soaring sales and reintroduction of unchanged full-year guidance buoyed investors as the stock climbed 8.4% to 918.6 Danish krone – it is now 36% up year-to-date.
Looking ahead. Reinstating unchanged full-year guidance is an impressive feat, given the disruption caused by the coronavirus pandemic. What is more impressive, though, is the sales performance and record order backlog of €35 billion. Looking longer term, the global movement toward a lower-carbon economy appears to be gathering pace, with governments factoring it into the Covid-19 recovery, which also bodes well for the company.
Analysts at Danish bank Sydbank said that Vestas’ strength and the fact that sustainable investments were high on the wish list for investors, meant that despite the strained valuation the stock had room to move higher.
The East River Becomes A New Energy Source For New York City
Three small tidal turbines will be installed off Roosevelt Island this fall and connect to ConEd’s power grid.
Wouldn’t it be fun to have your refrigerator powered by the East River?
That’s the idea behind a private company’s plan to install three small tidal turbines off Roosevelt Island this fall. The underwater system will be hooked up to Con Edison’s power grid.
I asked John Banigan, CEO of Verdant Power, the New York City-based company behind the project, whether I’d notice a difference in my apartment.
“No,” he said. “Power is power. But when you look out your window, you’ll see a cleaner sky.”
Make that a tiny, tiny, tiny bit cleaner.
The $8 million project will generate enough electricity to power the equivalent of roughly 100 homes.
And it’s taken two decades to reach this milestone, Verdant’s co-founder and chief commercial officer, Trey Taylor, says.
The company was launched in 2000 when Mr. Taylor, who already had a long career in public relations and advertising, came across promising new tidal turbine technology developed by folks at New York University.
The technology’s first test came in 2007, when Verdant installed a prototype turbine in the East River to power a Roosevelt Island Gristedes supermarket and the nearby Motorgate parking garage. It operated successfully for nearly two years.
Next step: a license from the Federal Energy Regulatory Commission to install a larger system in the same spot, which required 23 permits from 14 different agencies. The application was four phone books thick, Mr. Taylor recalls. Permission was granted in 2012.
Since then, Verdant has been busy refining its turbine technology—and doing a lot of fundraising. Mr. Taylor estimates his company so far has received $46 million, largely from Department of Energy and New York State Energy Research and Development Authority grants, along with funding from private investors including friends and family.
“We mortgaged our homes, but we’re having fun,” he said.
I asked Mr. Taylor if Con Edison will pay for Verdant’s power feed.
“I don’t know,” he said.
“You might want to find out!” I suggested.
When I checked with ConEd—the company that supplies electricity to 3.5 million residential and commercial customers in New York City and Westchester—it said it would indeed pay Verdant as it would pay for any power sent to its distribution system.
“We want to eliminate barriers to renewable energy wherever possible, and this is a unique opportunity to do so,” ConEd spokesman Jamie McShane said.
Not that the project will come close to paying for itself. “It’s to showcase it for the world,” Mr. Taylor says.
Verdant’s experience thus far is roughly in line with efforts taken to develop renewable energy of other types over the decades, says Robi Robichaud, a renewable energy expert with the World Resources Institute, a research nonprofit focusing on several global issues including energy.
Tidal turbine power has some advantages over wind and solar, he says. It’s more predictable. And because much of the world’s population is clustered near deep rivers and ocean ports, plants can be located close to consumers, which cuts infrastructure and transmission costs.
It’s also early days for tidal power development, Mr. Robichaud says. Electricity generated by wind power has been around since the 1800s, and solar since the 1950s. Costs for both have dropped enough in the past few decades to make them commercially viable.
Tidal technology got a later start. And in part because it’s difficult to install and repair things underwater, tidal systems currently cost three-to-four times more than solar and wind systems to build and operate. “But the economies of scale will come,” Mr. Robichaud says.
Last week, I met Mr. Banigan at a scruffy port facility in Perth Amboy, N.J.—across the Outerbridge Crossing from Staten Island—where the Verdant system was assembled this summer. It was only his third time seeing the turbines in person.
“It makes it real!” said Mr. Banigan, who left a four-decade banking career to join Verdant in 2014.
The five-meter (16-foot) diameter turbines look like propeller rockets drawn by a kid in the 1950s. They are mounted on a steel triangular foundation with 15-meter connecting arms. The entire assembly weighs about 100 tons.
On the big day, barges and tugboats will transport the system across New York Harbor and arrive at Roosevelt Island during the 7 a.m. slack tide—the point at which the river stands still before reversing.
While New York City might sound like a crazy place to attempt this sort of project, the East River is actually an ideal demonstration site, Verdant says. It’s the right depth, and the core current is a relatively swift 2.25 meters per second—faster than its rival on the other side of Manhattan. Sorry Hudson!
Going forward, the 10-person company has big plans. First, a $25 million fundraising effort. It hopes to hire another 35-to-40 employees to design and build a larger turbine that will operate more efficiently in deeper waters.
Next: Assembly plants around the globe along with, of course, maintenance and consulting services.
As for New York City and tidal power? It’s not likely the East River will be lighting up the five boroughs anytime soon. But Mr. Taylor has some fun ideas. Roosevelt Island could be fueled entirely with a combination of wind, solar and tidal power on its own self-contained smart grid, he says. And that includes a return to the Motorgate parking garage.
“Wouldn’t it be cool,” he says, “for NYC to have tidal-powered cars zipping around on the streets?”
Making Wind Turbines Greener Could Also Make Them More Expensive
Carbon-neutral turbines might raise prices in the short term as companies try to make zero-emission production more cost effective.
The world’s biggest wind turbine manufacturers have committed to eliminating their net emissions of greenhouse gases, but reducing the carbon footprint of their production process may mean customers have to bear some of the cost.
Global players such as Denmark’s Vestas Wind Systems A/S and Siemens Gamesa Renewable Energy SA, its German-Spanish rival, aim to hit an array of sustainability targets in the next decade. These range from building zero-waste turbines to reducing the emissions of their supply chain, posing the challenge of rising costs in a market where margins are already lean.
Unlike coal or natural gas power plants, wind energy does not emit the greenhouse gases that are responsible for global warming. But making the turbines needed to generate that power does. Wind turbine blades are made from a combination of fiberglass and resins that can’t yet be recycled in a cost-effective way.
Steel, another key component of the turbines, needs to be made at temperatures so high that at the moment they can only be achieved by burning fossil fuels. All of that that might lead to a market premium on carbon-neutral turbines, said Lisa Ekstrand, head of sustainability at Vestas, the world’s top turbine manufacturer.
“There will be a number of companies that will probably take the lead and will be willing to accept a bit of a higher cost for a more sustainable product in the short term, with the view of the costs coming down in the medium and long run,” she said, adding that sustainability programs ultimately aim to achieve costs “on par with today’s, or even lower.”
Major turbine producers are launching pilot programs to develop new technology and come up with cost-effective ways to make low-emissions wind turbines. Some initiatives underway include recycling components of decommissioned turbines as feedstock for cement production, redesigning the logistics network and switching to cleaner energy sources.
Towers are particularly problematic, because of the large amount of steel they contain. Siemens Gamesa has been running a pilot program with its suppliers for about two years to assess and improve its production progress of the component, said Jonas Pagh Jensen, an executive who focuses on health, safety and environment issues.
The program has cut CO2 emissions by 20,000 metric tons in Europe, the Middle East and Africa and has now been rolled out globally. “We’re trying to find out how fast can we move while remaining competitive, and the best way to do it is having an open dialog with our costumers to understand the pressure they’re also exposed to,” he said.
The company, based in Zamudio, Spain, is also working on projects to separate and reuse turbine blade materials. Although the process is not cost-efficient at the moment, “progress has been made, but whether we’ll get to a 100% recyclability is still to be seen,” said Jensen.
This approach can help wind turbine makers improve their potential waste recycling rate already north of 80% while lowering their emissions and boosting profitability, said Adeline Diab, head of ESG and thematic investing at Bloomberg Intelligence. “If you don’t have to recreate 80% of a turbine, it won’t be a like-for-like carbon savings, but it may contribute to a good portion of it, helping carbon neutrality targets.”
Solar And Wind Are Reaching For The Last 90% Of The U.S. Power Market
They’ve both grown exponentially over the last 30 years. Now there’s just one more decimal place to go.
Three decades ago, the U.S. passed an infinitesimal milestone: solar and wind power generated one-tenth of one percent of the country’s electricity. It took 18 years, until 2008, for solar and wind to reach 1% of U.S. electricity. It took 12 years for solar and wind to increase by another factor of 10. In 2020, wind and solar generated 10.5% of U.S. electricity.
If this sounds a bit like a math exercise, that’s because it is. Anything growing at a compounded rate of nearly 18%, as U.S. wind and solar have done for the past three decades, will double in four years, then double again four years after that, then again four years after that, and so on.
It gets confusing to think in so many successive doublings, especially when they occur more than twice a decade. Better, then, to think in orders of magnitude—10ˣ.
There are a number of reasons why exponential consideration matters. The first is that U.S. power demand isn’t growing, and hasn’t since wind and solar reached that 1% milestone in the late 2000s. That means that the growth of wind and solar—and that of natural gas-fired power—have come entirely at the expense of coal-fired power.
That replacement of coal with either natural gas (half the emissions of coal) or with wind and solar (zero emissions) is certainly an environmental achievement. Coupled with last year’s massive drop in emissions, that power shift also makes it much easier for the U.S. to meet its Paris Agreement obligations.
But it also means that challenges lie ahead for any power generation technology that isn’t wind or solar. BloombergNEF analyzed the future of major power systems extending out to 2050, which for the U.S. shows a renewed increase in electricity demand. Total generation will increase about 30% in the next three decades, BNEF predicts. During that time, wind power generation will increase 195% and solar power generation will increase 753%.
That means a few things. Even with a growing electricity system, solar and wind will continue to crowd out every other generation technology while also competing with each other. It also means that the electricity grid—and the businesses and services that use it—will need to become both more supple and more innovative to integrate so much renewable power.
That suppleness will have to come from a more robust grid, able to send more renewable energy from places where generation is surging to demand centers. It will also have to come from energy storage, both short term (a matter of hours) and potentially long term (a matter of weeks or more).
Innovation, on the other hand, will come down to the speed at which businesses realize that zero-carbon electrons are becoming ever more abundant and less expensive. As I wrote last week, we already have moments in some grids when solar power supply exceeds total demand. That’s a challenge, but it’s also an opportunity, which I hope entrepreneurs and big enterprises alike are ready to capitalize on.
My final thought is a return to exponents. There’s only one left for wind and solar in the U.S. power system. The next order of magnitude takes us from 10% to 100%, when the entirety of U.S. power generation comes from panels and turbines.
Wind and solar are now playing for the remaining 90% of the U.S. power mix. They won’t ever reach 100%, but they will force every other energy source—including natural gas—into whatever corner of the market they haven’t filled. In doing so, wind and solar will also compete with each other. That will create a country-sized opportunity to experiment with innovative ways to use all those new electrons.
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