The New Carbon Cycle

Carbon Prices May Drop Further with Predicted Long Offset Market

Having just returned from London where I spoke at the Climate Finance 2011 conference on the developments in North America, particularly the approval by the California cap and trade program, a rather glum audience listened to speakers discuss the oversupply of carbon offsets in the market going forward over the next several years. 

The long market was specifically discussed by Trevor Sikorski, Head of Environmental Market Research, Barclays Capital.  He presented a market of low prices for the present and next few years as a result of lower emissions becasue of a week economy and oversupply of allowances and offse

Point Carbon reported that UBS analysts predict carbon prices could go as low as 3 euros as the EU faces a predicted weak economy and the market remains oversupplied with permits until 2025.

As the EU considers lowering the carbon cap from 20 percent to 30 percent, it may be able to reach such a cap at low prices with offsets in such significant supply.

International Forest Carbon Association Launches Website

The International Forest Carbon Association (IFCA), a new business association devoted to private project development of projects that protect or regrow forests using private capital, has launced its website.  www.ifca.cc.

 Membership is now open and major partners will be announcd soon.

IFCA is currently developing working groups to address key issues for forest carbon and to carry out the work of the association.

More information can be found in a announcement on the IFCA website.

Voluntary Carbon Market Increases 34 Percent in 2010, Valued at $424 Million

Ecoystem Markeplace and Bloomberg New Energy Finance reported that the voluntary carbon market had a 34% increase in sales volume to a record 131 million tons of carbon dioxide equivalent (MtCO2e).

The estiamted worth of these sales in 2010 was $424 million.  These numbers were reported in "Back to the Future: State and Trends of the Voluntary Carbon Markets 2010."

“The healthy volumes reflect the growing emphasis of corporate social responsibility spending on climate change,” says Katherine Hamilton, Managing Director of Ecosystem Marketplace.  “The marketplace showed itself to be incredibly resilient – bouncing back from failed US legislation expectations, expanding its reach in developing countries and returning to its CSR roots.”

GE Introduces New Technology for Gas Power Plants That Work Bettter with Renewable Energy Sources

GE announce the development of the FlexEfficiency 50 Combined Cycle Power Plant.  GE statest that this plant will work better with wind and solar that are intermittent and where a supply of electricity is needed to ramp up when the sun or wind decrease and electrical production decreases from these sources.  The new plant can then be ramped quickly back down.

The company says the plant combines jet engine and gas turbine technology.  The plant reportedly is 61 percent efficient and provides unprecedented operational flexibility.

"For years, we have been working to develop technology that can, in the same breath, deliver breakthrough efficiency and deal head-on with the challenge of grid variability caused by wind and solar," says Paul Browning, vice president of thermal products for GE Power & Water. "The need for combined flexibility and efficiency is even more pressing today as countries around the world establish new emissions standards."

“With global energy demand expected to double by 2030 and electricity generation accounting for 40 percent of greenhouse gas emissions, utilities and government bodies are taking a hard look at how to produce power more efficiently,” said Ricardo Cordoba, president of GE Energy for Western Europe and North Africa. “This innovation can have a dramatic effect on CO2 emissions and offers a nimble, efficient and cost-effective way for us to help E.U. countries in their pursuit of 20-20-20 energy goals

International Standards Organization to Release Energy Management Standard in 2011

The International Standards Organization (ISO) is developing a standard for energy management known as 50001 that is scheduled to be released in the third quarter of 2011.  ISO 50001will be designed to companies and other organizations improve their energy performance, increase energy efficiency, and reduce greenhouse gas emissions.

Existing ISO standards for quality management practices (ISO 9000 series) and environmental management systems (ISO 14000 series) have successfully stimulated substantial, continuous efficiency improvements within organizations around the globe. An energy management standard is expected to similarly achieve major, long-term increases in energy efficiency.

The future standard will provide organizations and companies with a recognized framework for integrating energy efficiency into their management practices. Multi-national organizations will have access to a single, harmonized standard for implementation across the organization with a logical and consistent methodology for identifying and implementing energy efficiency improvements. The standard will also:

• Assist organizations in making better use of their existing energy-consuming assets
• Offer guidance on benchmarking, measuring, documenting, and reporting energy intensity improvements and their projected impact on reductions in GHG emissions
• Create transparency and facilitate communication on the management of energy resources
• Promote energy management best practices and reinforce good energy management behaviors
• Assist facilities in evaluating and prioritizing the implementation of new energy-efficient technologies
• Provide a framework for promoting energy efficiency throughout the supply chain
• Facilitate energy management improvements in the context of GHG emission reduction projects.

The issuance of the standard reflects a growing concern of organizations and firms to reduce energy use, become more effient in the use of energy, to find renewable, distributed options for energy production at their own locations, and to reduce their carbon footprint.

 

UN and Major Banks Call for Forest Carbon Credit Market as Critical to Preserving Forests

Leading financial institutions upped the ante on their future role in mitigating climate change as they called for more effective forest-carbon regulations during a United Nations report launch in London Friday, just months ahead of an international climate change meeting to be held in South Africa.

Banking, insurance and investment representatives at the event welcomed the findings of the new study, REDDy - Set - Grow: Opportunities and roles of financial institutions in forest-carbon markets, which stresses that the financial sector must step up its engagement in the emerging green market, and makes the case for its improved regulation to facilitate this.

Offers of cooperation by financial representatives at the event to work with their national and international regulators mark a turning point in efforts to get the forest carbon credit market off the ground, only months ahead of United Nations Framework Convention on Climate Change (UNFCCC) climate change talks that will possibly lead to a new mechanism to reduce deforestation and forest degradation, known as REDD+.  In order to protect forests, a private carbon credit market is essential.

"The market for forestry carbon has significant potential but will require concerted efforts in the design phase by policy-makers to ensure that it attracts flows of private capital. Because of the ability for sustainable forestry projects to deliver not just carbon but also biodiversity and community benefits, financial institutions stand ready to work with governments to help ensure the full potential is realised," said Abyd Karmali, Managing Director and Global Head of Carbon Markets at the Bank of America Merrill Lynch, during the press conference, which was held at the banks' European headquarters in London.

Governments successfully agreed in Cancun last December to making REDD+ a core component of the next global regime on climate change. To date, this has been carried forward by UNEP, the UN Development Programme and the Food and Agricultural Organization, with parallel and supportive work by the World Bank. However, the question of how this global mechanism will be implemented and financed remains unresolved, and will be a critical subject of future UN climate convention negotiations - including upcoming talks in Durban, South Africa.

The commitment of the private sector and financial institutions toward the implementation of REDD+ is crucial, the UNEP Finance Initiative (UNEP FI) study says, since the overall investment needed for implementation of REDD+ activities appears to exceed public capabilities and will thus largely hinge on action from the private sector.

  "It is critical to build a constructive dialogue between the public sector and the private sector so that private capital can be deployed efficiently and quickly into financing REDD+ activities," Christian del Valle of BNP Paribas said.  "The UNEP FI report clearly shows the way to implement this."

Previous research has established that a 50 per cent reduction in deforestation is needed by 2030 if the forestry sector is to support global efforts aimed at holding the global temperature rise to below 2 degrees Celsius, the global climate target the world's governments have set themselves in the international climate change agreements of the UNFCCC.

Achieving this reduction will require investment previously estimated at US$17 - US$33 billion per year, according to UNEP.

The report stresses how private sector participation in REDD+ and deforestation activities can lead to a win-win scenario for the finance sector and governments, since such projects can translate into both lucrative investment opportunities and cost-effective strategies to abate carbon emissions and protect biodiversity and livelihoods.

The forestry-based carbon market's value holds the potential to grow to US$10+ billion by 2020, according to The Economics of Ecosystem and Biodiversity (TEEB), while that of total forest ecosystem goods and services is estimated at US$5 trillion. This massive potential has, however, largely been left untapped so far, with low confidence levels from investors resulting from an insufficient and ineffective national and international regulatory framework.

Armin Sandhoevel, Allianz Climate Solution, said: "Allianz believes in the utmost relevance of forest-related projects such as REDD+, alongside with Programme of Activity (PoA) and small scale renewable energy projects, because they offer an outstanding value to the protection of biodiversity and to climate change mitigation by combining a wide array of activities into one project. But in order for the private investors to fully mobilize around REDD+ activities, we feel that some issues must be addressed. Credits derived from avoided deforestation projects need to be part of compliance schemes, and the projects need a robust domestic legal framework that allows investors to get involved with a long term perspective. Moreover reliable and rigorous standards for carbon credits derived from avoided deforestation are a pre-condition for long term price estimates, which are crucial for investors. We think UNEP FI is the adequate platform to talk to decision makers on how the REDD+ mechanisms can potentially be improved and, by extension, how future growth of investments in forest-related projects can be encouraged."

Finance sector attendees at the event saluted the report as the first step of a critical learning process that will not only sharpen their competitive edge, but also boost their role in shaping tomorrow's green economy.

"It is unwise in this day and age for companies that wish to remain competitive to turn a blind eye to emerging green markets such as the forest-carbon market. This is a rationale that makes sense from a sustainability perspective, but also from a profitability one," said Richard Burrett, partner at Earth Capital Partners LLP and Co-chair of UNEP FI.

A follow-up report of REDDy - Set - Grow specifically geared for policy-makers and containing recommendations on the design of forest-carbon policies will be released in June.

Financial institutions at the event were gathered by UNEP FI, a public-private partnership that has set the sustainable finance and responsible investment agenda for more than two decades and counts close to 200 members on all continents in the fields of investment, banking and insurance.

 

Accounting Changes Being Considered Could Alter Renewable Deals and Financing If PPAs Are Considered Leases

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are considering amending their standards in a way that may have a significant effect on deals and financing arrangements in the renewable field. 

Power purchase agreements are the typical way solar and wind developers sell power to utilities.  Under the new standards it appears these transactions may be classified as a leases, and require placing the deal on the utility's balance sheet, which is not done today, as the asset is owned by a third party renewable developer.  These would be considered capital leases.

According to Forbes.com, this accounting approach would deter certain energy-efficiency and renewable investments, and potential tax exposure and more disclosure requirements.  FASB and IASB are still receiving comments on this approach.

City of Dallas Partners with Lumetech and Lighting Science Group to Go Green with Energy Efficient LED Lighting in Its Parking Garages

DALLAS, March 24, 2011 – Lumetech Group, a leading provider of commercial LED lighting solutions, and Lighting Science Group (OTCBB:  LSCG), a leading American maker of LED lighting, announced today the conversion of five downtown parking garages to energy efficient LED lighting, positioning Dallas as one of the first major cities in the United States to adopt this energy and cost saving technology.

“As a first-mover, the City of Dallas is leading this green initiative in Texas and has raised the bar and set the standard when it comes to efficient lighting technology that reduces energy consumption and operating costs.  I want to commend City Councilman Ron Natinsky for embracing this new technology and establishing Dallas as a leader in going green,” said Ron Lusk, CEO of Lumetech. “Lumetech will continue to partner with government and corporate clients to provide high performance LED lighting that saves energy and costs.”

“With rising energy costs across the country, cities like Dallas are looking for ways to save energy—the installation of Lighting Science Group’s LED fixtures will significantly reduce the city’s maintenance, replacement and energy costs,” said Rich Weinberg, Chairman and CEO of Lighting Science Group.

Lighting Science Group’s long-lasting and ultra-efficient Flat LowBay LED fixtures were installed in garages at Dallas City Hall, Dallas Public Library, the Jack Evans Police Building, the freight terminal beneath Thanksgiving Square and the Morton H. Meyerson Symphony Center.  It is estimated that the annual energy savings for the City of Dallas will be in excess of 1,700,000 kWh or a 60% reduction in annual energy use.  In addition, as a result of the enhanced performance and reliability of the new lighting, the City of Dallas expects to reduce substantial cost of maintenance over the lifetime of the fixtures.

 “The City of Dallas is committed to acting in the best interests of its taxpayers and to improve the efficiency in which it operates.  Over the past few years, we have actively worked to become more environmentally efficient and have enacted a number of important green initiatives, including the recent efficiency upgrade of our parking garages.  I hope that our actions compel the leadership of other cities and private sectors to follow suit,” said Ron Natinsky, Dallas Council Member.

The announcement comes on the heels of Lumetech’s completion of Dallas County School’s parking lots that will result in an estimated annual energy savings of over 505,000 kWh per year and approximately $363,600 in electricity and maintenance over the lifetime of the fixtures.

Total Partner Makes Major Investment in SunPower

SAN JOSE, Calif. and PARIS, April 28, 2011 /PRNewswire/ -- SunPower (Nasdaq: SPWRA, SPWRB) and Total (CAC: TOTF.PA) today announced that the two companies have entered into a broad strategic relationship to shape the future of the solar industry. Total Group will launch a friendly tender offer through a wholly owned subsidiary for up to 60 percent of SunPower's outstanding Class A Common shares and 60 percent of SunPower's outstanding Class B Common shares at a price of $23.25/share for each class. The offer price represents a 46 percent premium over the April 27, 2011 closing price of SunPower's Class A common stock and a 49 percent premium over the April 27, 2011 closing price of SunPower's Class B common stock, and values SunPower's equity at $2.3 billion. In addition, Total will provide SunPower with up to $1 billion of credit support over the next five years. Following closing of the transaction, which has been approved by the boards of both companies, SunPower will continue to operate with its current management team.

"Total's commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector," said Tom Werner , SunPower's CEO. "With Total's $1 billion credit support agreement, solar research and development investments and the other resources available through its global network, we have taken the next step in positioning our business for continued growth and long-term success. Our relationship with Total will improve our capital structure enabling SunPower to accelerate our power plant and commercial development businesses, and expand our manufacturing capacity with lower cash requirements."

"The world future energy balance will be the result of a long-term transition in which renewable energies will take their place alongside conventional resources," said Philippe Boisseau , President, Total Gas and Power Division. "Over the past years, Total has built up sizeable renewable energy activities. Today, Total is executing on its strategy to become a major integrated player in solar energy. We evaluated multiple solar investments for more than two years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy and downstream footprint."

"Solar is becoming a material addition to the new generation portfolio around the world, with more than 40,000 MW of solar photovoltaic power installed globally," continued Werner. "Total and SunPower will collaborate to ensure that solar becomes a platform for an efficient, competitive and sustainable energy future. Already, SunPower's high-efficiency, high-reliability solar photovoltaic power plant costs are competitive with other new resources."

"SunPower is preparing for rapid expansion through the next decade," added Boisseau. "We look forward to supporting SunPower as a strategic partner with whom we expect to find many synergies with our solar activities as well as with Total Group overall, while maintaining their entrepreneurial culture of rapid innovation."

Transaction Details

Under the terms of the tender offer agreement, SunPower shareholders will receive $23.25 per share in cash at closing for each share validly tendered in the tender offer, subject to pro-ration in the event that more than 60 percent of SunPower's Class A and Class B shares are tendered. Total expects to begin its tender offer within 10 business days. Following the completion of the transaction, SunPower's shares will continue to trade on Nasdaq under the symbols "SPWRA" and "SPWRB." The closing of the tender offer is conditioned on a minimum of 50% of the outstanding shares of each of the Class A and Class B common stock being tendered, clearance by U.S. and European Union antitrust authorities, and other customary closing conditions.

Under the credit support agreement, Total will offer to guarantee an amount up to $1 billion of SunPower's repayment obligations with respect to letters of credit issued over the next five years in connection with SunPower's global utility power plant and large commercial installation businesses. This credit support should allow SunPower to substantially reduce the total costs of its letters of credit and financing. SunPower's affiliation with Total is expected to benefit SunPower, lowering its cost of capital and increasing its access to uncollateralized debt financing.

In addition, SunPower and Total have entered into an affiliation agreement under which Total will nominate a majority of directors to SunPower's board of directors, which will be expanded to 11 members following the closing. This agreement also includes conditions on Total's ability to purchase additional shares of SunPower. Specified transactions between Total and SunPower shall be approved in advance by SunPower's independent board members.

SunPower and Total have also entered into a research and collaboration agreement under which the companies will focus on advancing photovoltaic technologies across multiple research and development projects.

SunPower intends to call a meeting of its stockholders within six months following closing to combine its Class A and Class B common stock into a single class of common stock with one vote per share. This plan is subject to the company's receipt of a tax opinion that such reclassification will be permitted on a tax free basis, and Total has agreed to vote its shares in favor of the reclassification.

EIA Predicts US Won't Hit 2005 Levels of Greenhouse Gas Emissions until 2027

In a surprising prediction, the US Energy Information Agency (EIA) predicted that the US would not hit 2005 levels of greenhouse gas (GHG) emissions until 2027.  The study was surprising as most had expected US emissions would rise every year.

 
The study assumed that no changes in public policy would occur with respect to GHG emissions.  The report concluded that using its assumptions, the emissions that fell 3 percent in 2008 and 7 percent in 2009, largely as a result of the economic recession,energy-related CO2 emissions grow slowly in the due to a combination of modest economic growth, growing use of renewable technologies and fuels, efficiency improvements, slower growth in electricity demand (in part because of the recent recession), and more use of natural gas, which is less carbon-intensive than other fossil fuels.

In the Reference case, which assumes no explicit regulations to limit GHG emissions beyond vehicle GHG standards, energy-related CO2 emissions do not return to 2005 levels (5,996 million metric tons) until 2027, growing by an average of 0.6 percent per year from 2009 to 2027, or a total of 10.6 percent. CO2 emissions then rise by an additional 5 percent from 2027 to 2035, to 6,311 million metric tons in 2035.