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  • Why the Wind Market is hurting

     

    “Demand for wind is simply not at the level where a lot of these companies that are making these investments woud like it to be,” says Matt Kaplan, a senior analyst with IHS Emerging Energy Research.

    The first major factor in the slowdown is the drop in electricity consumption. With lower demand for electricity, utilities don’t have to procure as much renewable electricity under their state targets. This has impacted a number of project owners who sell power on the competitive wholesale market.

    Secondly, natural gas prices have fallen about 65% since 2008, from $11 per MMBtu to around $4 per MMBtu. Given that wind competes directly with natural gas, this makes the resource much less competitive. And with more shale gas reserves being tapped in the U.S., prices will stay low in the coming years.

    Finally, the lack of a long-term national target for renewables in the U.S. is causing major component and turbine manufacturers to reconsider investments in the country. As a result, job growth in manufacturing will likely fall flat again this year.

    The reduction in demand for wind means that prices for turbines are coming down. Utilities are watching the equipment prices and waiting to sign power purchase agreements, wondering if prices will continue to fall. Meanwhile, more competition in manufacturing – particularly from asian players – is forcing turbine suppliers to focus heavily on differentiating their products in an increasingly crowded field.

    “It’s a tough market out there…[but] we keep focusing on technological innovation,” says Mike Revak, director of Siemens’ American wind division. “Clearly we don’t sit idly by…staying on the cutting edge of technology gives us a competitive position.”

    Revak says that Siemens won’t see installations of its turbines drop much in the U.S. this year. But if the demand picture stays they way it is today, sales will certainly be impacted into 2011. Revak believes that a federal renewable energy target could not only increase demand for wind, it could also help make the industry more competitive during challenging times like today.

    “Without that that long term policy, you can’t drive down the cost of wind. You can’t have the innovation along the supply chain,” says Revak. “With that support we can make the investments and improvements to make wind more competitive with all energy.”

    So what does all this mean for the wind industry this year? Matt Kaplan of IHS Emerging Energy Research predicts a 40% to 60% drop in installations.

    Things could potentially turn around over the next 12-18 months. With a long-term national target in place and an increase in demand for electricity, wind might be able to make a good comeback. Clearly, despite the short-term retraction, many of the largest companies in the world are still very bullish on wind. And some executives, like Sonia Bonfiglioli, CEO of the leading components manufacturer Bonfiglioli, believe that the downturn will eventually be a good thing for the industry.

    “Renewables faced a lot of speculation…from this crisis the real businesses will survive. I’m convinced that this will move toward a real industry with competent businesses and people, and no doubt it will grow,” says Bonfigioli.

    The big unknown is exactly when the growth will pick back up. It’s still uncertain how quickly the industry can rebound, given all the factors working against it.

    To hear more analysis on this issue, listen to this week’s podcast linked above.

  • Wanted: Some belief in a leader

     

    Of course, we also wanted a leader who believed in things and would stick to his guns. A leader we could respect. A leader who, if he went on and on about something being really important, wouldn’t just ditch it when the going got tough.

    A big part of Rudd’s problem is inexperience. As a result of that inexperience and bad advice he has seriously underestimated the electorate. He thought he could stay popular by appearing to pander to our whims.

    Turns out we have no respect for a leader who merely gives us what we say we want. Somewhere inside us there is a semi-conscious understanding – probably born of our experience as children – that we need a leader who sometimes imposes on us things we don’t fancy but he knows are for our own good.

    The tyro politician’s error is to assume success is simply about never telling us anything we don’t want to hear. That’s the appearance but there’s a deeper and more complex reality.

    In the months before the 2007 election, Labor’s focus groups detected public dissatisfaction over the rising cost of living. Rudd tried to capitalise on this disaffection by expressing great concern about the issue and implying – without actually promising – there was something he could do about it.

    This was the origin of two of the early setbacks in Rudd’s term as Prime Minister, the failures of Fuel Watch and Grocery Watch, the first bits of evidence fostering the public’s growing (if unfair) conviction that Rudd is all talk and no action.

    Guess what? If you conduct focus groups today you’ll find much dissatisfaction over the rising cost of living. It is, I suspect, an almost permanent state. The cost of living is always rising – but so too are wages and pensions. We have genuine cause for complaint only when the rise in prices is outstripping the rise in our incomes. And though that happens from time to time, over the past 10 or 15 years wages have grown a lot faster than prices.

    So our unceasing complaint about the rising cost of living – always changing its focus, from the cost of petrol to interest rates to the price of electricity – is just another case of us wanting to have our cake and eat it. We wish we lived in a world where prices never rose but incomes rose as they do now. Dream on.

    Our problem is not with the rising cost of living but with our efforts to keep up with the rising standard of living. We worry about every price rise because, in our unceasing attempt to keep up with the Joneses (who strive to keep up with us), we over-commit ourselves. When you spend all your income – perhaps more than your income – you always feel poor, always have trouble making ends meet, no matter how high your income.

    Politicians who imagine this kind of foolish selfishness defines the electorate underrate us. We’re looking for politicians who, in their concern to protect and advance our interests, demand more from us.

    Rudd thinks we went cold on his emissions trading scheme because his opponents gave us an exaggerated opinion of what it would do to our cost of living. But Hugh Mackay, the noted social researcher, has a roughly opposite take: having been convinced by Rudd and others that our greenhouse gas emissions need to be reduced, we expected to be asked – even compelled – to change our behaviour.

    When cities were running out of water, we had to stop using water in certain ways. Few resented this and almost all complied. The more we complied the more convinced we became of the seriousness of the problem and the need for strong action.

    With climate change, however, no immediate demands were made on us. This was partly because of Rudd’s misguided fear that making demands on us would make him unpopular.

    Mackay makes the psychologist’s point that our changes in attitude don’t last unless they’re quickly and strongly reinforced by a change in our actions (a truth that doesn’t fit easily with economists’ aversion to moralising, compulsion and even voluntary action, in favour of mere changes in prices).

    Now, thanks to his great misstep in abandoning his trading scheme, Rudd lacks the moral authority to be believed even when he assures us the mining companies’ claims that the resource tax would damage the economy are self-serving scaremongering.

    Ross Gittins is economics editor.

     

  • Olympic Dam expansion at risk over tax: Morgan Stanley

     

    “We think further project curtailments, including that of the $US20-$US40bn Olympic Dam project, are likely if the RSPT remains in its current form,” he said.

    “Under the RSPT as proposed, the project has no economic value, in our view.

    “The RPST reduces the net present value of the project to an extent that it becomes negative, and return on invested capital below minimum hurdle rate of 15 per cent used by the mining industry.”

    BHP has undertaken a feasibility study into the expansion of Olympic Dam which could see the advent of open pit operations in addition to the existing underground mine.

    Xstrata earlier this month shelved spending on two Queensland projects expected to cost a combined $6.6 billion and employ 3250 workers, including the $6bn Wandoan coal project in the Surat Basin.

    Fortescue Metals last month also put $US15bn of projects in the Pilbara on hold because of the uncertainty surrounding the tax.

    Campbell said key changes on the RSPT are needed to enable projects to proceed including lifting the basis of a super profit to a minimum of 10 per cent, and preferably 15 per cent, from the 6 per cent proposed.

    This issue of where the tax kicks in has been a key issue for Fortescue boss Andrew Forrest.

    Morgan Stanley’s note came as the Rudd government is said to be considering modifying the tax for different minerals in the first sign of compromise in its battle with the industry.

    Campbell also called for the headline tax rate to be reduced to 20 per cent from the proposed 40 per cent.

    Morgan Stanley’s preferred mining exposure is copper and companies with assets outside Australia.

    Campbell said there are three primary areas where the RPST could be challenged under the Australian Constitution after discussions with a “leading constitutional legal firm”.

    bennetm@theaustralian.com.au

  • Nuclear Fusion Projects Worries EU

     

     

    At the centre of the issue are dreams of harnessing nuclear fusion, which releases vast amounts of energy in the core of a star, under huge gravitational forces and temperatures of around 10 million degrees Celsius.

     

    Scientists have shown the process can be recreated on Earth, combining simple hydrogen isotopes to release vast amounts of energy, but so far it has not been demonstrated on an industrial scale. Nor have previous experiments released more energy than they consume.

     

    In 2006, more than 30 countries signed a deal to build the ITER nuclear fusion reactor, under construction in Cadarache, southern France. At its core will be a 500-cubic-metre doughnut-shaped steel vessel in which a superheated stream of plasma circulates in a vacuum, held in place by superconducting magnets.

     

    If all goes well, from 2020 the project will be capable of generating around 500 megawatts of fusion energy – clean power with no climate-damaging emissions and little radioactive waste.But increasing complexity and rising prices for steel, concrete and copper have led to a tripling of construction costs since they were estimated in 2001.

     

  • Tiny desert town goes solar in a big way

     

    Each 240-foot-long trough row concentrates the sun on photovoltaic modules attached to the edges of the arrays. That boosts the solar cell’s electricity production as does a tracking mechanism that allows the arrays to follow the sun throughout the day. Such concentrating photovoltaic systems — which Skyline calls “high gain solar” — have been a niche market due to their relatively high costs. But as solar cell prices decline and solar thermal projects get bogged down in environmental disputes, they have become increasingly attractive as they can be built near utility substations and plugged directly into the grid eliminating the need for expensive new transmission systems.

    Skyline has pushed to lower costs by using common materials — glass, steel — and by designing the arrays so their components can be mass-produced by automotive manufacturers. The company last year struck a deal with the Michigan subsidiary of Canadian auto manufacturing giant Magna International to make components for its HGS 1000 solar system.

    In other news on the solar frontier Thursday, Silicon Valley startup MiaSolé said the National Renewable Energy Laboratory had confirmed that the company’s copper indium gallium selenide solar cells have 13.8 percent efficiency in production. Such thin-film cells typically have a lower efficiency than standard polysilicon solar cells but are cheaper to manufacture. With an efficiency approaching 14 percent, MiaSolé could give some standard module makers a run for their money.

  • PM may end up dumped in a ditch

    PM may end up dumped in a ditch

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    Simon Benson Blog Icon Arrow

     

    Simon Benson

    Monday, June 07, 2010 at 11:25pm

     

     

    KEVIN Rudd is in serious trouble. And it’s not the electorate he should be worried about.

    It’s a cabal of powerbrokers and his own MPs.

    According to the mathematical principles used to remove Morris Iemma from office in NSW, the PM should already be a goner.

    In 2008, when the NSW Labor powerbrokers Mark Arbib and Karl Bitar (these are the same blokes now shoring up Rudd’s leadership) first came after Iemma, his popularity was in the mid 30s – around where Rudd is now.

    Labor’s primary vote was 35 per cent and Iemma had three years to run to an election.

    Federal Labor’s primary vote is now an appallingly low 33 per cent. And Rudd has not three years, but three months.

    Some suggest there is no precedent for a move on the PM. Nonsense. The only precedent is that it hasn’t happened in a first term.

    The other difference is that Iemma was still popular among his backbench – the majority were personally loyal.

    Rudd has the added problem that the majority of his caucus don’t like him.

    The mood of the caucus last week was described as solemn.

    That was a polite understatement. They are filthy. That many of them stand to lose their seats after just one term is causing many to start talking about alternatives – not after the election – before.

    With a swing of just 1.4 per cent, Labor could lose 14 seats and Government – and that is before we consider the mining seats. Based on yesterday’s figures of a two-party preferred vote of 53/47 in favour of the Coalition, they could lose double that.

    While it is just talk, talk has a way of being put into action.

    Julia Gillard is being spoken of in the corridors for the possibility of a move to her before an election.

    Arbib, the wiley senator and former NSW party boss was the major powerbroker who put Rudd into office. Bitar is the party’s national secretary.

    Both are now Rudd’s closest political advisers. But Arbib, at least, has already started talking up Gillard. Not explicitly but enough to get tongues wagging.

    Just as they have to take responsibility for the abysmal state in NSW, both must take responsibility for where Rudd, and Labor, are in the polls.

    That is something neither will want to do. If there is risk they could wear responsibility for an election loss after one term, they would switch to Gillard in a heartbeat.

    Rudd’s problem is that he is not only running out of time to turn things around, he may soon find he is running out of true friends.