Tag Archives: industry
Biomass Energy Growth Flags As Official Support Wavers
http://www.ft.com/cms/s/0/3baaaee2-04d6-11e3-9ffd-00144feab7de.html#ixzz2cPVXDIJu By Guy Chazan The chimneys of Drax Power Station are seen through a field of wheat near Selby, North Yorkshire.©Reuters Drax power station near Selby, North Yorkshire The UK biomass industry received a shot in the arm this week, as a Danish pension fund pledged to invest £128m in a new 40 megawatt power plant at Brigg in Lincolnshire to generate electricity from straw. But the good news masked a difficult outlook for the sector. A more accurate indicator came on Monday, when RWE npower closed a coal-fired power plant at Tilbury, Essex, which had previously been planned for conversion into one of the world’s largest biomass power stations. Biomass, once seen as pivotal to Britain’s hopes of meeting its renewable energy targets, is hitting the buffers as the government rethinks support for the sector. Its waning fortunes have come as a shock to many in the renewables sector, which had viewed biomass as among the most promising non-fossil fuels. Coal-fired plant operators, threatened with shutdown under stringent EU environmental laws, found they could extend their life by burning wood pellets. Some green groups have long questioned the benefits of growing trees and crops for fuel, fearing it could lead to deforestation. However, the main reason for the sour mood in the sector is not environmental opposition but doubts over government subsidies. Many developers had hoped their projects would qualify for the coalition’s new system of support for low-carbon technologies, the so-called “contracts for difference”, or CFDs. But in a recent consultation document, the government said new dedicated biomass plants that produce electricity but not heat – most of those now on the drawing board – should not be eligible for CFDs. The Department of Energy and Climate Change said it continued to support the conversion of old coal plants to biomass, which it said “provide value for money and help to meet [the UK’s] climate targets”. But it said government analysis showed that new-build dedicated biomass plants offered less value for money, measured by carbon savings per pound spent, compared with other renewable technologies such as offshore wind. That judgment has caused dismay in the industry. “It’s damped the mood,” says David Hostert of Bloomberg New Energy Finance. “Projects that have been in limbo for the last four to five years are now even further away from financing.” Biomass was long central to the UK’s ambitions of deriving 15 per cent of its overall energy from renewable sources by 2020. Ministers say bioenergy, which includes biofuels such as ethanol as well as biomass, has the potential to provide about 30 per cent of the 2020 target. Some progress has been made. A government scheme, the Renewable Heat Incentive, which helps businesses meet the cost of installing technologies such as heat pumps and biomass boilers, has been largely successful. Biomass is also expanding fast in combined heat and power projects, such as on-site power generation initiatives at supermarkets, although subsidies may be harder to obtain after next year, when the rules will be tightened. Despite the setback at Tilbury, which failed to qualify for a subsidy, other projects to convert existing coal-fired plants are going ahead with government support. Drax, which has a 4000MW coal-fired power plant in Yorkshire, has launched a £750m investment programme to switch three of its six units to wood pellets. Eggborough, a 2000MW coal-fired plant in Yorkshire, is also pressing on with a conversion plan. But other projects, especially those aiming for generating capacity of more than 60MW, are struggling. “Some people are on their knees,” says Paul Thompson, head of policy at the Renewable Energy Association. The government has also introduced a 400MW cap for new dedicated capacity, with the result that enthusiasm for biomass has been severely dented. “A year-and-a-half ago people hoped there would be an explosion of investment in the sector,” says Bloomberg’s Mr Hostert. “Now the outlook is still good compared to other countries in Europe but certainly not as rosy as it was 18 months ago.” Continue reading
Biofuels Could Lead To Billions in New Capital Investments
Research firm finds new capital investments in biofuels could tally nearly $70 billion over next ten years Published: Jul 23, 2013 Though biofuels appear to be expanding more slowly than originally projected, they will soon grab a stronger foothold in global infrastructure, and may translate into $69 billion worth of new capital investments, says energy research firm Navigant. According to their latest research, the firm says even in the wake of slowing overall biofuels growth and a renewed interested in fossil fuel sources, the next wave in advanced biofuels is nearing commercialization and is expected to advance significantly. Projected revenue from biofuels production, Navigant says, could reach $7.6 billion by 2023. “Conventional ethanol, derived from corn starch, coarse grains, and sugarcane, is expected to remain the largest segment of biofuels over the next 10 years despite facing increased scrutiny as a viable long-term alternative to fossil-based liquid fuels,” says Mackinnon Lawrence, principal research analyst with Navigant Research. Research firm finds new capital investments in biofuels could tally nearly $70 billion over next ten years “The fastest growing segment in the industry, though, will be advanced biofuels such as advanced ethanol, biobutanol, and green diesel, which are moving beyond the pilot and demonstration scale at a handful of projects across the globe,” Lawrence adds. But supply and demand policies will play a critical role in the development of the biofuels market, Navigant points out. Specifically, the firm says targeted production is expected to surpass both obligatory and voluntary blending policies by 2019, assuming actual production will keep pace with current supply targets. “This imbalance is expected to have a significant impact on ethanol and biodiesel blending policies at the country level,” the research says. But Navigant also projects that policy makers could capitalize on greater supply and expand existing blending mandates to encourage greater integration of biofuels into the domestic fuel mix. Though 2019 is more than five years off, some analysts project the “blend wall” – or the point at which more biofuels are made than can be legally blended into fossil fuels – will arrive as soon as next year in the United States. In a February commentary, University of Illinois economists Scott Irwin and Darrel Good explained that in the U.S., policies such as the Renewable Fuels Standard will mandate that a certain amount of biofuels is produced, but the consumption has to increase to necessitate more investment and expansion in the industry. “It seems unlikely that E85 consumption could increase from around 100 million gallons today to a total of 5 billion gallons in 2015. This far exceeds the current E85 fueling infrastructure (around 600 million gallons per year),” the economists wrote, noting that “we are also skeptical that E15 consumption could increase anywhere near the needed 5 billion gallons by 2015 due to a variety of limitations.” Despite the uncertainty surrounding biofuels policy and the potential of the industry to grow, however, Good and Irwin note that EPA has the authority to publish an advanced ethanol mandate – similar to what Navigant’s research expects – thereby expanding existing biofuels policy and continuing with the RFS for the next several years. Continue reading
Agriculture: The Good and Bad in a Sector that Looks Cheap*
By Martin Tillier, August 14, 2013 MOS) have borne the brunt of the losses in price as evidenced by a chart of an ETF that tracks them, Global X’s Fertilizer ETF SOIL . This has led many to conclude that there is value to be had there, but the news that caused the big drop at the end of last month is still relevant. The Belarusian Potash Company, a joint venture between Belaruskali and Russia’s Uralkali was unwound. This giant producer had enormous pricing power, and the ending of the cartel has produced a sharp drop in prices around the globe. The problem I see is that artificially high prices have, over the years, resulted in increased supply. This level of supply is still there and, at market pricing, it will be years before the supply and demand equation comes back into balance. In a few months, the recent bounce back may start to look like a pause in a medium term decline in the industry. Long term, it will undoubtedly present some opportunities, but the industry may well have further to fall before that happens. Agricultural supply companies not dependant on potash have also underperformed in general this year and the best value may be found there, but again, not all are equal. Monsanto ( MON ) is a controversial company because of their focus on genetic modification. That may continue to weigh on the stock, but my reasons for staying away have more to do with valuation and the technical look of the chart. The series of lower lows and lower highs evident here is hardly encouraging. Couple that with a P/E over 18 and the company looks, at best, fairly valued. The Good Valmont Industries ( VMI ) is not a pure play on agriculture. Their fabricated metal and coatings products have other applications, but the company was founded on irrigation systems and they are still their best known product. With a global concern about water usage and conservation, their expertise in that area should be invaluable in the future. They are a solid, profitable company and a P/E around 12 looks remarkably cheap. In this case, a bottom seems to have been found just above 130, which, if nothing else, gives a decent stop-loss level. Deere & Company ( DE ) is probably the best known agricultural supply company outside the industry, due to their consumer products division. They too have underperformed massively this year, losing a couple of bucks overall. Assuming continued gradual recovery in the consumer area and growing demand from agriculture, DE also looks good value at a P/E under 10. A more global play can be had by an investment in the IQ Global Agribusiness Small Cap ETF ( CROP ). This fund is actually up around 10% YTD, but has still underperformed the market. The fund’s focus on small cap agricultural businesses around the world makes it more risky than DE or VMI, but it is a pure bet on the growth of agriculture around the world. As demand increases, so technological advancement becomes key, and an investment spread amongst small companies makes it more likely that you will have a piece of “the next big thing” when it comes along. As the stock market continues to move basically sideways, the importance of identifying sectors with potential for growth is exaggerated. In the case of agriculture, the opportunity is there, but it is not universal. Internal dynamics could keep the fertilizer suppliers depressed for some time, but in other areas a simple return to the mean will provide a decent profit. We all eat (some more than others: see my picture above) and the world’s population continues to grow, so demand for the end product of agriculture is assured. It is possible to profit from this, but selectivity is the key. *I cannot tell you how strongly I had to resist the temptation to write a headline about “planting a seed” or “reaping a profit”! Read more: http://www.nasdaq.co…7#ixzz2c3QqpE81 Continue reading
