23/02/2017

The Age Of The Giant Battery Is Almost Upon Us

Bloomberg - Joe Ryan | Brian Eckhouse

Photographer: Chris Ratcliffe/Bloomberg
  • Prudential, Investec among lenders financing storage projects
  • Falling prices and long-term contracts making storage bankable
The idea that giant batteries may someday revolutionize electrical grids has long enthralled clean-power advocates and environmentalists. Now it's attracting bankers with the money to make it happen.
Lenders including Investec Plc, Mitsubishi UFJ Financial Group Inc. and Prudential Financial Inc. are looking to finance large-scale energy-storage projects from California to Germany, marking a coming-of-age moment for the fledgling industry. The systems help utilities solve a longstanding clean-power conundrum: managing the unpredictable output from wind and solar farms, and retaining electricity until it's needed.
Battery costs have declined 40 percent since 2014 and regulators are mandating storage technology be added to the grid. That's encouraging utilities to offer longer contracts and developers are expected build $2.5 billion in systems globally this year. These trends are changing the risk profile, giving lenders confidence in batteries in much the same way that power-purchase agreements opened banks' doors years ago for wind and solar power.
"Having big money come in is the first step to widespread deployment," Brad Meikle, a San Francisco-based analyst for Craig-Hallum Capital Group LLC, said in an interview.
That's a shift from many of the storage projects we've seen to date as expensive components and unproven revenue potential made commercial lenders leery. Developers typically have financed systems from their own balance sheets, cobbling together revenue from short-term utility contracts or wholesale electricity markets.
"We see an opportunity in the space," Ralph Cho, Investec's co-head of power for North America in New York, said in an interview. "We're attempting to be a first mover."
Storage contracts to date in the U.S. and Canada rarely exceeded three years, said Bryan Urban, head of North American operations for the Yverdon-les-Bains, Switzerland-based storage developer Leclanche SA. Now utilities are signing agreements for three to seven years, and sometimes as long at 10 years, he said. And in the U.K., National Grid Plc is signing four-year contracts for storage services.

'Uncertain Revenue'
"Instead of these short uncertain revenue streams, you now have longer-term contracts that investors can get behind," said Logan Goldie-Scot, head of energy storage analysis at Bloomberg New Energy Finance in London.
The industry still faces significant hurdles. While costs have fallen, batteries are still an expensive way to manage electricity. Developers have little data to demonstrate how their systems will perform over time. Also, existing rules for wholesale power markets were mostly written for traditional equipment that generates and delivers electricity, and the industry is still developing market mechanisms to determine how to value and pay for storage systems that offer different functions.
The market is fragmented with a variety of different technologies, including lithium-ion batteries, flow batteries and flywheels. They have different capabilities and developers offer different types of services. They can smooth the flow of power on the grid, absorbing power when there's too much and delivering needed jolts when demand spikes.
That means the industry is still figuring out the best uses for storage systems, and banks don't want to wind up backing the Betamax of storage. Plus, several one-time high flyers ended up filing for bankruptcy in recent years -- remember A123 Systems Inc., Xtreme Power Inc. and Beacon Power Corp. -- leaving lenders gun shy.
The most important business stories of the day. Utilities have been experimenting with energy storage for decades, and while momentum has been slow, it's starting to take off. It took 30 years to install enough systems to add up to a gigawatt, and Sekine expects 1.7 gigawatts expected to go into service in 2017 alone. State regulators are a key driver, with California ordering utilities to install at least 1.3 gigawatts of storage by 2020, and Massachusetts on track to set its own targets by July.

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Government 'Clean Coal' Push Would Be Likely To Make Australia's Emissions Worse

The Guardian - 

Coalition plan for more efficient coal plants could well increase emissions in a sector that is the second most polluting in the developed world
Once the Hazelwood power station in Victoria closes, there will be a significant improvement in Australia’s electricity supply emission intensity. Photograph: David Crosling/AAP
The government has indicated it will act to allow the Clean Energy Finance Corporation to finance new coal-fired power plants on the basis that these coal plants have lower emissions than existing coal power plants.
While such power plants may have lower emissions than Australia’s ageing and extremely inefficient existing coal plants, they would most likely increase Australia’s emissions rather than decrease them. And this is in a context where Australia’s electricity supply is the second most polluting in the developed world (beaten only by Estonia).
The new coal power plants the government is promoting as clean emit around 700kg to 750kg of CO2 for every megawatt-hour of electricity they produce. Is that really worthy of the term “clean” and would it help reduce our emissions?
To help you judge, the chart below shows how such a power plant compares to the emissions intensity of not just Australia’s existing coal plants and also Australia’s overall grid’s emissions intensity in 2016 (taking into account the power it also gets from gas, hydro, wind and solar). On that basis the plant looks somewhat cleaner. But is that the right benchmark?
With the closure of the Hazelwood coal-fired power station shortly, there will be a significant improvement in Australia’s electricity supply emission intensity. In addition, by 2022, which is probably the earliest point a new coal power plant could be built, Australia will have added a significant amount of new zero-emission power plant capacity from wind and solar to meet the renewable energy target.
Using the government’s own analysis of future emissions based on existing policies, our grid’s emissions will be lower than these so-called clean coal power plants.
As some added context the chart also shows the emissions intensity of a new baseload gas power plant and also the grid emissions intensity of electricity globally and in North America and Europe.
Illustration: Tristan Edis/Green Energy Markets 
So the government’s plan for the Clean Energy Finance Corporation to fund new coal plants would most likely make Australia’s emissions worse. And by international benchmarks it looks appallingly emissions intensive.

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The Climate Bombshell The Politicians Didn't Touch

Fairfax - Michael Pascoe

Never mind the politicisation of energy and carbon policy – the market and legal system is moving rapidly to instil the discipline and punishment the government isn't game to discuss.
That was the core of the climate change bombshell dropped by the Australian Prudential Regulation Authority on Friday. The policy vacuum will be filled by the personal liability of company directors and the disclosure requirements of financial regulators.
APRA's Geoff Summerhayes highlighted the potential exposure of banks' and insurers' balance sheets to real estate impacted by climate change and to re-pricing or even 'stranding' of carbon-intensive assets in other parts of their loan books. Photo: Jonathan Carroll
If the ABC's Insiders program and the federal Environment and Energy Minister, Josh Frydenberg, are any guide, Canberra hasn't yet grasped the importance of the speech by APRA executive board member, Geoff Summerhayes, to the Insurance Council of Australia forum.
In keeping with the Paris Agreement Australia has signed and the Financial Stability Board's (FSB) policy development, APRA leaves no room for climate sceptics. Both the obvious physical and perhaps less obvious "transition" risks of climate change are real and present dangers to the financial system APRA is charged with safeguarding.
And it's the transition risks of moving to a low-carbon economy that Summerhayes fingered as being particularly important for financial entities. APRA and its international counterparts fear the impact on banks, superannuation funds and asset managers of changes in policy, law, markets, technology and prices that are part of the agreed transition to a low-carbon economy.
Spare a thought here for the board of the Northern Australia Infrastructure Facility (NAIF) as it considers Adani's application for a billion-dollar loan to build a railway from the Galilee Basin to the Queensland coast. While being lent on by pro-coal government members, NAIF directors would do well to consider why Australia's banks seem to have no interest in financing the line. It's not just a green PR issue – it's the danger of being left with a stranded asset and directors being personally liable.
Summerhayes quoted legal opinion that it's only a matter of time before directors who fail to properly consider and disclose foreseeable climate-related risks are held personally liable for breaching their statutory duty of care and diligence under the Corporations Act.
The same consideration would weigh heavily on Clean Energy Finance Corporation (CEFC) directors if the government changes the legislation to allow CEFC to lend to new coal-powered electricity generators.


APRA's blunt climate change warning
The Australian Prudential Regulation Authority's very blunt warning of the obvious physical risks and transition risks of moving to a low-carbon economy. Michael Pascoe comments.

Summerhayes noted that much of the early focus on climate change risks had been on insurance firms and their exposure to losses from increasingly frequent and severe natural disasters, but there were a variety of other potential issues.
"These include the potential exposure of banks' and insurers' balance sheets to real estate impacted by climate change and to re-pricing or even 'stranding' of carbon-intensive assets in other parts of their loan books," he said.
"They also include exposure of asset owners and managers – an important consideration given the size of Australia's superannuation sector and its heavy weighting towards carbon-intensive equities and a relatively resource-intensive domestic economy."
Frydenberg on Sunday gave the impression the government was determined to bet Australia's energy future on the coal industry finding a way to make carbon capture and storage (CCS) economically viable.
The policy vacuum will be filled by the personal liability of company directors and the disclosure requirements of financial regulators.
Given the Coalition's refusal to price carbon so as to give CCS here even a small chance of success, that looks as sensible as an individual betting their financial future on winning OzLotto. That sort of policy response, driven by the coalition's internal ructions, climate sceptics and concentration on simplistic immediate "hip pocket" politics, contrasts with broader forces APRA comprehends.
APRA's view is that the Paris Agreement provided a very reliable signal that policy and regulatory efforts would intensify.
"The transition now in train could potentially lead to significant repricing of carbon-intensive resources and activities and reallocation of capital," Summerhayes said.
"This process will be highly sensitive to changes in regulation, technology, the physical environment and behaviour by investors and institutions – and interrelated perceptions and sentiment about all of the above. Inevitably, even under a sanguine view of how smoothly this transition happens, there will be systemic impacts and implications that have to be carefully monitored."
The Summerhayes speech is APRA's first public stand on climate change. It has not rushed to it, coming nearly two years since the G20 asked the FSB to consider climate change risks and more than a year since the board established its task force on climate-related financial disclosures.
It's in step with the insurance industry increasingly finding its voice on climate change issues after going a little quiet during the Abbott government days of overt climate scepticism.
In another context at the same ICA conference, ASIC chairman Greg Medcraft spoke about the legal licence tending to follow the social licence. On the risks and financial impact of climate change, it seems the market and legal judgments will proceed without political leadership.

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