Today we have guest blog entry by David Boles from our European FCStone office.

A look at the renewable sector can be complicated and multi-faceted. At this juncture, I will take a quick look at mechanisms that are used thus far to promote the growth of the renewable Industry. Generally, renewable, clean Energy, RES-E (renewable energy sources-electricity), low carbon economy all refer to the same thing. The production of energy/electricity without the unlocking of carbon that is outside the existing carbon cycle. These include Solar, wind, wave, Hydro, Biomass, Biofuels, Energy from waste and Nuclear (contentious). Some of the above emit equivalent amounts of CO₂ as fossil fuels but are caught in a cycle, and thus are regarded as carbon neutral.

After studying the area, the floodgates are about to open, but everything seems to be held up by monied interest groups and politicians. These are just hurdles in the process of progress. For instance in the U.S, the E.P.A are pushing emission abatement at stationary sources. In their initial proposal, the EPA sought to target emission sources greater than 25,000 tonnes CO₂ a year. This has been revised to 25,000 tonnes, starting January. The EPA will not have an easy time of it, litigation has already started from both sides. The Centre of biological diversity are trying to get the stricter initial proposals reinstated. The senate aren't happy, adopting the attitude, if we can't do it no one will.

The renewable sector has one main disadvantage; energy produced in this manner costs more than energy from fossil fuels. Many governments around the world have used the following methods to bridge the gaps, allowing RES-E catch up with its fossil fuel counterpart. These are Taxation, feed-in tariffs and tradable green certificates. During the nineties, European academics lobbied for the introduction of a carbon tax, but to no avail. However the tax system has been used, offering tax relief to RES-E investors. Government grants have also been made available for anaerobic digesters and other renewable technologies. The tax avenue has been abandoned with respect to individuals; in Europe motor tax has been increased for large vehicle emitters. Tax, I feel, takes the onus for action away from the individual. It is important that everyone contributes and feels to be contributing to the solution. A proactive solution is needed.

Feed in tariffs are widely used through out Europe, as well as countries such as India. The feed- in- tariff guarantees the electricity producer a guaranteed price/kwh(kilowatt hour) for up to 15 years into the future. This ads incentive to investors as incomes can be forecast over the coming years.

The US are getting on board through the actions of ………, you guessed it, California. The Californian Clean Energy feed-in tariff Proposal was published on Tuesday 24/08. The proposal aims to extend existing tariffs from 1.5 MW projects to 20MW. Again, this will encourage investment.

Tradable Green Certificates (TGC's, Renewable Energy Certificates, REC's in the US) certify that electricity has been produced by 'green technologies'.

The cost difference between RES-E and conventional fossil fuel, in theory is made up by the price of the TGC's. Some propose that TGC's are a superior regulatory framework to enhance renewable electricity and promote the technologies involved. Even though there are many detractor's to the concept of TGC's.

The premise of a tradable green certificate market is the RES-E is sold in the traditional electricity market at current prices. The surplus price of RES-E is met by obligated buyers

under a required quota system. The obligated buyers can be the consumers or the electricity producers.

The European commission promotes the use of TGC's. Their use promotes the 'polluter pays principle' and moves away from an incentive, interventionist system. The chart below shows the percentage of RES-E of total electricity production in Europe.

Source: Eurostat Data

The efficiency of a TGC system would be promoted through a pan-European system. The chart below illustrates which systems have been adopted by a selection of European Nations.

OTHER NEWS:

• Climate AID reaches 30bn goal, set out at Copenhagen Summit.
• German Chancellor wants a bigger contribution from utility Companies towards a zero Carbon economy.
• Russian forest fires to cost up to $300bn. 935,286 hectares are estimated to be affected at a cost of 25,000/hectare.
• US- now recognise climate change as a security threat, disaster situations, such as the present Pakistani floods are seen as a fertile ground for insurgents. Centre for a new American Security (CNAS).
• UK- Under sea CO2 storage licensing plans published. Carbon Capture and Storage.

   

Today we have guest blog entry by David Boles from our European FCStone office.

A look at the renewable sector can be complicated and multi-faceted. At this juncture, I will take a quick look at mechanisms that are used thus far to promote the growth of the renewable Industry. Generally, renewable, clean Energy, RES-E (renewable energy sources-electricity), low carbon economy all refer to the same thing. The production of energy/electricity without the unlocking of carbon that is outside the existing carbon cycle. These include Solar, wind, wave, Hydro, Biomass, Biofuels, Energy from waste and Nuclear (contentious). Some of the above emit equivalent amounts of CO₂ as fossil fuels but are caught in a cycle, and thus are regarded as carbon neutral.

After studying the area, the floodgates are about to open, but everything seems to be held up by monied interest groups and politicians. These are just hurdles in the process of progress. For instance in the U.S, the E.P.A are pushing emission abatement at stationary sources. In their initial proposal, the EPA sought to target emission sources greater than 25,000 tonnes CO₂ a year. This has been revised to 25,000 tonnes, starting January. The EPA will not have an easy time of it, litigation has already started from both sides. The Centre of biological diversity are trying to get the stricter initial proposals reinstated. The senate aren't happy, adopting the attitude, if we can't do it no one will.

The renewable sector has one main disadvantage; energy produced in this manner costs more than energy from fossil fuels. Many governments around the world have used the following methods to bridge the gaps, allowing RES-E catch up with its fossil fuel counterpart. These are Taxation, feed-in tariffs and tradable green certificates. During the nineties, European academics lobbied for the introduction of a carbon tax, but to no avail. However the tax system has been used, offering tax relief to RES-E investors. Government grants have also been made available for anaerobic digesters and other renewable technologies. The tax avenue has been abandoned with respect to individuals; in Europe motor tax has been increased for large vehicle emitters. Tax, I feel, takes the onus for action away from the individual. It is important that everyone contributes and feels to be contributing to the solution. A proactive solution is needed.

Feed in tariffs are widely used through out Europe, as well as countries such as India. The feed- in- tariff guarantees the electricity producer a guaranteed price/kwh(kilowatt hour) for up to 15 years into the future. This ads incentive to investors as incomes can be forecast over the coming years.

The US are getting on board through the actions of ………, you guessed it, California. The Californian Clean Energy feed-in tariff Proposal was published on Tuesday 24/08. The proposal aims to extend existing tariffs from 1.5 MW projects to 20MW. Again, this will encourage investment.

Tradable Green Certificates (TGC's, Renewable Energy Certificates, REC's in the US) certify that electricity has been produced by 'green technologies'.

The cost difference between RES-E and conventional fossil fuel, in theory is made up by the price of the TGC's. Some propose that TGC's are a superior regulatory framework to enhance renewable electricity and promote the technologies involved. Even though there are many detractor's to the concept of TGC's.

The premise of a tradable green certificate market is the RES-E is sold in the traditional electricity market at current prices. The surplus price of RES-E is met by obligated buyers

under a required quota system. The obligated buyers can be the consumers or the electricity producers.

The European commission promotes the use of TGC's. Their use promotes the 'polluter pays principle' and moves away from an incentive, interventionist system. The chart below shows the percentage of RES-E of total electricity production in Europe.

Source: Eurostat Data

The efficiency of a TGC system would be promoted through a pan-European system. The chart below illustrates which systems have been adopted by a selection of European Nations.

OTHER NEWS:

• Climate AID reaches 30bn goal, set out at Copenhagen Summit.
• German Chancellor wants a bigger contribution from utility Companies towards a zero Carbon economy.
• Russian forest fires to cost up to $300bn. 935,286 hectares are estimated to be affected at a cost of 25,000/hectare.
• US- now recognise climate change as a security threat, disaster situations, such as the present Pakistani floods are seen as a fertile ground for insurgents. Centre for a new American Security (CNAS).
• UK- Under sea CO2 storage licensing plans published. Carbon Capture and Storage.