Capital costs slow renewables in developing world

  • : Electricity, Emissions, Hydrogen
  • 24/04/16

Higher cost of capital in emerging economies for clean energy technologies remains the key challenge for attracting investments to meet the goal set last year of tripling global renewable capacity by 2030.

Developing nations, excluding China, need to spend around $2.4 trillion/yr on clean energy and climate resilience by 2030 to help reduce global warming, according to the UN.

But governmental and development spending will fall short, said Avinash Persaud, the special adviser on climate change to the president of the Inter-American Development Bank.

"There are not enough subsidies in the world to blend 2.4 trillion/yr every year to fund the energy transition," Persaud said today at the Columbia Global Energy Summit in New York.

And characteristics of renewable energies make filling the gap with private-sector financing more difficult than for traditional hydrocarbons.

Some clean energy technologies such as solar plants and wind farms have seen their cost of capital decreasing in more developed regions. But this cost, or the minimum expected financial return to justify an investment, for utility-scale solar PV projects in emerging and developing economies was more than twice that in advanced economies last year, energy watchdog the IEA has said.

The biggest risk for developing clean energy projects in emerging economies stands on currency risks, according to Persaud.

"When an investor in the developed world invests in an oil, gas, coal project in a developing country they know they have an asset that is going to earn them a foreign currency revenue if they need it. They can export that," he said, adding that the case for renewables plants is different, raising the financial risk of projects. Investors in a solar farm are paid by local consumers of the utility in local currency, increasing the hedging cost.

The IEA has estimated that narrowing the gap in the cost of capital between emerging and developing economies and advanced economies by 1pc could reduce financing costs for clean energy by $150 bn/yr.


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24/05/22

Q&A: Over 100 entities trading Australia's ACCUs

Q&A: Over 100 entities trading Australia's ACCUs

Sydney, 22 May (Argus) — The Australian Carbon Credit Unit (ACCU) market has developed significantly in recent years, with demand moving away from the federal government to the private sector. Argus spoke with the country's Clean Energy Regulator's (CER) chair and chief executive David Parker and executive general manager Carl Binning about that transformation. Edited highlights follow: Demand for ACCUs had been typically driven by the federal government through carbon abatement contracts awarded in auctions but the market is becoming more diverse with rising volumes cancelled for voluntary purposes and an expected increase in surrenders under the safeguard mechanism . What's the approximate number of participants actively trading ACCUs now? Parker: There's more than 100 entities trading actively in the market. That's both on the demand side and the supply side. Some of them are in both. How does that compare with a few years ago? Binning: It's growing year on year. Parker: Around 20-30pc growth in successive years. What's the role of the government in purchasing ACCUs now? Parker: We no longer do the purchasing side [through auctions]. The government now has that function through the Department [of Climate Change, Energy, the Environment and Water] but they can do other things. Binning: The government transferred the ERF [Emissions Reduction Fund] funding to the Powering the Regions Fund and that fund has a mandate to purchase ACCUs. But at this time there is no government direction to purchase . The CER still has a purchasing function to build up volumes under its cost containment reserve, which can only be accessed by safeguard facilities that exceed their annual emissions baselines and are unable to buy ACCUs from other sources. In that case, they would need to pay more than A$75 during the next fiscal year . This is more than double the current prices for ACCUs but how would that cost containment reserve work exactly if spot prices reached that triggering level? For instance, would a single company be able to buy all or most volumes if it bid first? Parker: Good question, we don't know the answer. Binning: The government is currently consulting on the design of the cost containment measure. One of CER's main works is the implementation of a new registry replacing the Australian National Registry of Emissions Units (ANREU). Is this going to solve some of the transparency limitations of the current registry? Parker: I'm very much in favour of transparency. We'll do as much as we possibly can in terms of putting out data, subject to the legal constraints. Binning: The Chubb review has been implemented in three stages. That created the capacity to make a rule under the legislation which enables more data to be published. And the government has accepted the recommendation, so we would expect some time over the next 12 to 18 months for some rules to be made to make that data available. And as David said, as a regulator, we welcome the shift towards greater transparency. What sort of data should we expect to see publicly available for the first time? Binning: I think some project level data. One of the challenges with the integrity debate is that we have data that is not accessible to the marketplace. So where there are on-ground checks being done, for example, making some of those checks more transparent and visible to the marketplace will give it confidence. Should we expect to have access to individual ACCU transfers between accounts, as we currently have for large-scale generation certificates in CER's REC registry or even ACCU holdings of individual account holders? Parker: We hope so. We do publish some information on that but it's aggregated information. Binning: One of the challenges with the ANREU registry is distinguishing between intermediaries in the marketplace that are holding ACCUs to further sell them versus entities that may be holding ACCUs to pass on to safeguard facilities for compliance purposes. Safeguard entities are large corporations, so they often have quite a significant number of related entities. Over time — and you'll see in the next quarterly market report — we're trying to get better at understanding those holdings that are held by related entities for the safeguard mechanism, so we get a stronger sense of how much of the demand has been taken up through the new safeguard mechanism. I think progressively we'll get better at that, but it's not as simple as it might be said. Is the new registry still expected to be operational in the second half of 2024, with the new carbon spot exchange coming online by the beginning of 2025 ? Parker: We hope so. We are about to put out a consultation paper on what the market wants to see in the exchange traded platform. Binning: Our consultation is about understanding the role of an exchange traded fund in complementing all the other markets that are emerging — including futures markets and secondary markets — whilst we still progress the registry, which underpins the whole thing. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

G20 seeks to ease climate funding to cities


24/05/21
24/05/21

G20 seeks to ease climate funding to cities

Sao Paulo, 21 May (Argus) — Climate funds need to make it easier for countries and especially individual cities to access resources, a G20 working group said in Brazil today. Experts, representatives of G20 member countries and financial organizations gathered in Rio de Janeiro to discuss ways to leverage financing to face extreme climate events. The two-day event was hosted by the G20 — which Brazil presides over this year — the country's finance minister, global network Finance in Common (FiCS) and the Brazilian NGO climate and society institute (iCS). Delegates agreed that climate funds — especially the green climate fund, the adaptation fund, the global environment facility fund and the special climate change fund, which will hold a combined $30bn in the next five years — need to allow better access for cities to combat climate change. That means easing bureaucracies and identifying bottlenecks, according to Ivan Oliveira, deputy secretary for sustainable development at Brazil's finance ministry. Guaranteeing funding for climate projects can take many years, Oliveira said. But "climate change requires climate funds to deliver quickly," he added. FiCS' chairman Remy Rioux — who is also the chief executive of France's development agency — pointed to the different accreditation processes for different climate funds as hindering climate financing. A single accreditation process would ease access, he added. "We will do our best to find innovative financial solutions for climate resilience and resilient infrastructure," he said. Climate projects should also be able to tap into multiple funds more easily, Oliveira said. Rioux also called for the creation of an international guarantee fund to back individual national banks should they need resources to combat climate change. Additionally, local governments should be able to deal directly with climate funds, instead of having to work through the federal government, he added. The director of Brazil's development bank Nelson Barbosa also noted that a lack of financial guarantees and exchange rate volatility hinder banks and country's ability to access climate funds. The G20 working group will present a report with suggestions to address these issues in July, in Belem — the capital of northern Para state — Oliveira said. The city will also host Cop30 in 2025. Rio Grande do Sul Brazil's federal government is discussing a line of credit to southern Rio Grande do Sul state, which has been hit by heavy rainfall and historic flooding since late April, Barbosa said. "A special line of credit will be needed for reconstruction," he said. "We already have lines for adaptation and mitigation and now we have to think about lines to take care of losses and damages. Reality has arrived, and development banks have to deal with the effects of the climate." But he did not give further specifics on the measures. On Monday, President Luiz Inacio Lula da Silva called for the creation of an international fund backed by "people that pollute the planet" to aid Rio Grande do Sul. He has in the past called on rich nations to fund global efforts to mitigate climate change. Rains in Rio Grande do Sul have left 161 people dead, 85 missing and over 581,600 people displaced, according to the state's civil defense. Rebuilding the state will cost over R19bn ($3.7bn), according to the state government. By Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

UK will not bank ‘surplus’ from third carbon budget


24/05/21
24/05/21

UK will not bank ‘surplus’ from third carbon budget

London, 21 May (Argus) — The UK overachieved on emissions reduction targets under its third carbon budget, but it will not carry forward the emissions ‘surplus' to the next carbon budget, the government said today. A carbon budget is a cap on emissions over a certain period. The UK's third carbon budget covered 2018-22, while the fourth carbon budget covers 2023-27. UK emissions over 2018-22 stood at 2.15bn t/CO2 equivalent (CO2e) — 319mn t/CO2e below the third carbon budget cap. Emissions on average over the period were 47pc lower than emissions in 1990 — the baseline year. "By the end of the period in 2022, UK net greenhouse gas emissions were 50pc lower than base year emissions", the government said. The country is also on track to overachieve during the fourth carbon budget, it added. "The government decision not to carry forward the surplus keeps the UK within its ambitious target with no additional headroom to emit greenhouse gases over the coming years", the government said. The UK has made progress on cutting emissions, including phasing out coal. But the surplus was largely down to external factors, including the Covid-19 pandemic, the independent advisory Climate Change Committee (CCC) found previously. The UK has a legally-binding target to reach net zero emissions by 2050. It also has targets to cut emissions by 68pc by 2030 and 77pc by 2035, both from the 1990 base level. The CCC warned in February that the government should not carry forward any surplus from the third carbon budget, to avoid weakening action on decarbonisation. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

States have duty to cut GHGs, protect oceans: Court


24/05/21
24/05/21

States have duty to cut GHGs, protect oceans: Court

London, 21 May (Argus) — States that are party to the UN Convention on the Law of the Sea (Unclos) have an obligation to reduce their greenhouse gas (GHG) emissions to protect oceans, the International Tribunal for the Law of the Sea said today in an advisory opinion. The opinion was requested by the Commission of Small Island States on Climate Change and International Law in December 2022. The tribunal found unanimously that states party to Unclos "have the specific obligation to take all measures necessary to ensure that anthropogenic GHG emissions under their jurisdiction or control do not cause damage by pollution to other states and their environment". The group of small island states welcomed the outcome, and said they saw it as a victory. Small island states are extremely vulnerable to the effects of climate change. Unclos has 169 parties — including the EU, China and almost all G20 nations. But the US — the second-highest emitter — is not a party to the convention. Countries must submit new national climate plans — known as nationally determined contributions (NDCs) — by early next year to UN climate body the UNFCCC. "Today's outcome will be instrumental to push the countries most responsible for the climate crisis to ramp up their ambition", lawyer at environmental law firm ClientEarth Lea Main-Klingst said. "And because business must follow where governments lead, companies and financial institutions are going to feel a knock-on effect from this development, too", Main-Klingst added. Similar cases, focused on climate change, are awaiting an advisory opinion or ruling from various international courts. The Inter-American Court is hearing arguments on how climate change is affecting human rights this month, while the International Court of Justice will consider a similar question later this year. The European Court of Human Rights ruled last month that signatories to the European Convention on Human Rights (ECHR) must protect their citizens from the "serious adverse effects of climate change", in a landmark ruling for climate litigation. The ocean is the world's biggest carbon sink, capturing emissions and much of the excess heat generated by GHGs. Sea surface temperatures have hit record highs in recent months, while the global temperature was in 2023 on average 1.45°C higher than pre-industrial levels , the World Meteorological Organisation said earlier this year. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia opens up ACCU method development


24/05/21
24/05/21

Australia opens up ACCU method development

Sydney, 21 May (Argus) — The Australian federal government has officially begun to accept proposals for the development of new carbon crediting project methods outside of government, as it looks to boost supply and innovation. Individuals, groups or organisations will now be able to submit method proposals for carbon abatement, which would generate Australian Carbon Credit Units (ACCUs) if approved and developed. Climate change and energy minister Chris Bowen made the announcement on 21 May during lobby group Carbon Market Institute (CMI)'s Carbon Farming Industry Forum in Cairns, Queensland. "The proponent-led model aims to encourage more innovative approaches to carbon abatement and will help to boost the supply of ACCUs to support our net zero ambition," Bowen said. The development of new ACCU framework methods has been until now led by the federal government, but this has proved "too slow," CMI's chief executive John Connor said today. None of the five new method priorities for 2022, announced in October 2021, have yet been finalised, Connor said. Opening up the method development process was one of the 16 recommendations made by an independent panel led by the country's former chief scientist Ian Chubb which reviewed the ACCU scheme in 2022-23. Proponents will need to follow a five-stage process, starting with the submission of new ideas for methods or changes to existing methods followed by an expression of interest (EOI) to the Emission Reduction Assurance Committee (Erac), the statutory body responsible for ensuring the integrity of Australia's carbon crediting framework. The Erac will accept EOIs in rounds, with the current one open until 12 July. The Erac will use triage criteria to assess EOIs, including scale of abatement, proposal complexity and whether it would incentivise innovation. The committee will publish its assessment of EOIs on a so-called method development tracker, with successful proponents moving on to the development phase. Finally, the Erac will publish draft methods for public consultation before recommending them to the climate change and energy minister. The proponent-led model announcement comes at a time of increasing concern about future ACCU supply, as the development of new methods or method variations by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) has been taking longer than originally expected — partly because it has been also focusing on implementing the recommendations from the Chubb review. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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