India's Green Energy Giant Hits Rough Patch
Suzlon, India's wind power giant, has reported a quarterly loss after years of expansion and profit growth. It was hurt mainly by the ongoing global credit crunch, slowing wind turbine sales, and by rising costs and a provision to do repairs stemming from the widely reported quality problems at the wind-turbine manufacturer's overseas plants.
Suzlon reported a consolidated net loss of 589.7 million rupees ($12.1 million) for the quarter ended Dec. 31, compared with a net profit of 1.52 billion rupees a year earlier. Consolidated total revenue more than doubled to 68.93 billion rupees from 31.7 billion rupees, while consolidated total expenditure surged to 63.19 billion rupees from 28.48 billion rupees, according to media reports.
Chairman and Managing Director Tulsi Tanti said the global credit crunch is likely to hit sales growth in the wind-energy sector, which had a compounded annual growth rate of more than 34% over the past five years.
But Suzlon said it expects the industry's outlook to turn favorable by 2010 as easing credit and lower costs boost demand from the U.S., Europe, China and India.
U.S. factories building parts for Wind turbine industries have announced a wave of layoffs in recent weeks, and trade groups are projecting 30 to 50 percent declines this year in installation of new equipment, barring more help from the government, according to the New York Times.
Prices for turbines and solar panels, which soared when the boom began a few years ago, are falling. Communities that were patting themselves on the back just last year for attracting a wind or solar plant are now coping with cutbacks.
“I thought if there was any industry that was bulletproof, it was that industry,” said Rich Mattern, the mayor of West Fargo, N.D., where DMI Industries of Fargo operates a plant that makes towers for wind turbines. Though the flat Dakotas are among the best places in the world for wind farms, DMI recently announced a cut of about 20 percent of its work force because of falling sales, the NY Times reports.
Much of the problem stems from the credit crisis that has left Wall Street banks reeling. Once, as many as 18 big banks and financial institutions were willing to help finance installation of wind turbines and solar arrays, taking advantage of generous federal tax incentives. But with the banks in so much trouble, that number has dropped to four, according to Keith Martin, a tax and project finance specialist with the law firm Chadbourne & Parke.
Wind and solar developers have been left starved for capital. “It’s absolutely frozen,” New York Times quotes Craig Mataczynski, president of Renewable Energy Systems Americas, a wind developer. He projected his company would build just under half as much this year as it did last year.
The wind and solar industries are hopeful that President Obama’s economic stimulus package will help. But it will take time, and in the interim they are making plans for a rough patch.
Solar energy companies like OptiSolar, Ausra, Heliovolt and SunPower, once darlings of investors, have all had to lay off workers. So have a handful of companies that make wind turbine blades or towers in the Midwest, including Clipper Windpower, LM Glasfiber and DMI.
Some big wind developers, like NextEra Energy Resources and even the Texas billionaire T. Boone Pickens, a promoter of wind power, have cut back or delayed their wind farm plans.
President Obama has often talked about America's energy policy and dealing with its impact on climate change as a priority. He wants to create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future. Transformation in the way people and businesses use technology could reduce annual man-made global emissions by 15 per cent by 2020 and deliver energy efficiency savings to global businesses of over $ 800 billion, according to a new report published by independent non-profit The Climate Group and the Global e-Sustainability Initiative (GeSI). The choice of a Nobel laureate scientist, Berkeley's Dr. Steven Chu as energy secretary by Obama reflects this priority.
There were reports in 2007 that some of the wind projects in Pakistan could not proceed because of the lack of wind turbines availability, even though the land had been allocated and permits issued for this purpose. Most vendors were sold out through 2009. The contract terms in turbine supply agreements became increasingly favorable to the vendors, with less warranty, earlier and larger pre-payment requirements, and higher prices. After years of boom, the second half of 2008 saw a bust in the wind energy sector with credit being extremely tight.
Finally this year, Pakistan awarded a contract to a Turkish company to set up a wind farm near Hyderabad. President of Zorlu Enerji (Pvt) Ltd., Murat Sungar Bursa, who signed the agreement with HESCO (Hyderabad Electric Supply Company) in Pakistan, said that the estimated cost of 50 MW project was 120 million dollars. He added the company was also considering to further expand the project up to 250MW. He said incentives offered by Pakistan’s renewable energy policy was a major factor in the company’s decision to invest here. He said that capacity of the wind farm will be enhanced upon successful completion of 50 MW phase. Zorlu Enerji has become the first company to establish wind farm for power generation in Pakistan after signing Energy Purchase Agreement with Hyderabad Electric Supply Corporation for purchase of six MW electricity generated at the company’s facility in Jhimpir. NEPRA (Pakistan's power regulator) has awarded tariff of US cents 12.1057 Per KWH, which is cheaper than the electricity generated from thermal sources. The power generated from the first phase would be routed to the Jhimpir gird station by HESCO and would be sufficient to electrify 6,900 homes in Hyderabad region. Harnessing the strong winds coming from South West, the wind farm is first major commercial wind power project of the country, comprising five towers in the first phase with an installed capacity of 1.2MW wind turbine generator per tower.
The slowdown in the renewable energy sector is likely to be temporary. President Obama is expected to get the US Congress to approve $150b to support the US renewable energy sector with large government incentives. The US policy will likely boost the global renewable energy market as well.
A video clip about renewable energy in Pakistan:
Renewable Energy in Pakistan
The Wind Blog
Renewable Energy Businesses in Pakistan
Global Wind Turbines Market
Pakistan Council of Renewable Energy Technology
Renewable Energy for Pakistan
Pakistan Policy on Renewable Technology
Sugarcane Ethanol Project in Pakistan
Community Based Renewable Energy Project in Pakistan
Wind energy, it appears, has never been so competitive. Prices for wind turbines last year dropped below €1 million ($1.36 million) per megawatt for the first time since 2005, due largely to over-capacity, greater manufacturing efficiency and increased scale, according to the market researcher Bloomberg New Energy Finance.
The group’s most recent Wind Turbine Price Index, based on confidential data provided by 28 major purchasers of wind turbines, shows that prices remain under pressure in most parts of the world. The survey includes more than 150 undisclosed turbine contracts, totaling nearly 7 GW of capacity in 28 markets around the world, with a focus on Europe and the Americas.
While the news is good for wind farm project developers hoping to save money, it’s troubling for manufacturers and component suppliers trying to make money – they have seen their margins shrink over the past couple of years. Global turbine contracts signed in late 2010 for the first six months of this year averaged €980,000 per MW, down 7 percent from €1.06 million per MW in 2009 and a peak of €1.21 million in 2008 and 2007.
All manufacturers covered by the survey showed “aggressive pricing, according to New Energy Finance, which was acquired by Bloomberg in 2009. Low-priced power-purchase-agreements in markets exposed to competitive electricity prices – rather than fixed feed-in tariffs – appear to have put additional pressure on turbine contracts. Average prices in Italy, the United Kingdom and the United States were well below €1 million per MW for contracts signed in 2010 and slated for delivery in the first half of this year.
The cost of electricity generated by wind is now at record low levels, according to the survey. “For the past few years, wind turbine costs went up due to rising demand around the world and the increasing price of steel,” Michael Liebreich, chief executive of Bloomberg New Energy Finance, said in a statement. “Behind the scenes, wind manufacturers were reducing their costs, and now we are seeing just how cheap wind energy can be when overcapacity in the supply chain works its way through to developers.”
Overall, the annual 2010 global wind market shrunk for the first time in two decades, down 7 percent from 38.6 GW in 2009 due mainly to a disappointing year in the U.S. and a slowdown in the Europe, according to figures released earlier this month by the Global Wind Energy Council. The U.S. which is traditionally one of the strongest wind markets, saw its annual installations drop by 50 percent from 10 GW in 2009 to just over 5 GW in 2010, GWEC said in a statement.
“Our industry continues to endure a boom-bust cycle because of the lack of long-term, predictable federal policies, in contrast to the permanent entitlements that fossil fuels have enjoyed for 90 years or more,” Denise Bode, CEO of the American Wind Energy Association, said in the same statement.
GWEC secretary general Steve Sawyer believes 2011 will be better. “Orders picked up again in the second half of 2010 and investments in the sector continue to rise,” he said.
On that note, French manufacturer Alstom won a contract this month from Traianel to build Germany’s 80-turbine Borkum West II wind farm offshore farm. The project is scheduled for completion in March 2012.
The National Electric Power Regulatory Authority (NEPRA) on Thursday approved Rs 10.50 per unit as upfront tariff for power generation through sugar mills by utilising sugarcane bagasse.
According to the NEPRA spokesman, this upfront tariff is approved to encourage sugar mills to generate around 1,500 megawatts (MW) on fast track basis.
At present hydel generation is costing Rs 2.50 per unit, generation through natural gas is costing around Rs 5.0 per unit, thermal generation from Rs 14 to Rs 18 per unit and electricity generated through diesel is costing Rs 23 to Rs 28 per unit in the country.
The approval of upfront tariff for sugar mills would encourage sugar mills to plan their investment in this new sector for steering out the country from power crisis faced by the nation during the last decade.
The government has plans to generate around 3,000 MW cheaper electricity through sugarcane bagasse on fast-track basis and investors would be facilitated and encouraged.
Necessary amendments would also be made in the existing co-generation and renewable energy policies to make it simplified and investor-friendly.
In a recent meeting on fast-track development of bagasse-based power generation projects it was informed that the government was utilising all the resources to end the energy crisis and the power generation from bagasse would be another step to produce electricity from indigenous resources.
Pakistan Sugar Mills Association (PSMA) has been taking interest in the bagasse-based power projects and time and again assured the government to provide full cooperation.
Approval of the upfront tariff was lingering on since a few years. During the last two governments, hectic efforts were made to utilise bagasse for cheaper power generation. Initially 1,500 MW would be completed on fast-track basis. The meeting had also reviewed in detail the existing co-generation and renewable energy policies and discussed various proposals to simplify it in order to get benefit at the earliest.
It has been felt necessary that amendments in the existing policies would help alleviate the power crisis in the country. It was decided that the Alternative Energy Development Board (AEDB) would process the bagasse-based projects under renewable energy policy.
A committee was also set up to finalise the recommendations in consultation with all the stakeholders so that approval could be taken from the competent forum to start the projects.
AEDB and PSMA have already informed the government that Pakistan was the fifth largest producer of sugarcane with production of 50 million tonnes of sugarcane annually, yielding over 10 million tonnes of bagasse.
Power generation from bagasse would not only reduce the furnace oil import, but even save Rs 33 billion to Rs 49 billion of foreign exchange per annum. The country has 87 sugar mills with a capacity to generate 3,000 MW electricity from bagasse in winter season
Pakistan encapsulates the renewable energy challenge faced by many developing and emerging countries. Despite abundant renewable resources – including solar, wind, hydropower and biomass – very little of this potential has been utilized. At the same time, about a third of the country’s people do not have access to electricity.
Pakistan has ambitious plans for solar and wind projects, and has developed a comprehensive policy framework for renewable energy, but projects on the ground remain few and far between.
What accounts for this gap? “One major reason is a lack of credible resource data,” says Arif Alauddin, the former CEO of Pakistan’s Alternative Energy Development Board, and now Managing Director of the National Energy Conservation Center.
While high-level solar and wind maps are widely available, these do not contain the granular data required by governments to understand the country’s full resource potential and needed by the private sector to identify specific sites for development.
To address this challenge, Pakistan and eight other countries are joining with the World Bank in a new Renewable Energy Mapping Program to carry out mapping of renewable energy resources that will for the first time produce rich, nationwide data for each country. Coordinated and financed by the World Bank’s Energy Sector Management Assistance Program (ESMAP), the initiative will cover mapping of solar, wind, biomass, and small hydropower potential.
“The importance of this resource mapping [for Pakistan] cannot be overstated,” says Arif Alauddin. “The country’s energy shortage is unprecedented, tariffs are going up, and petroleum imports are eating up a large share of export earnings. There is a need to shift to domestic renewable energy resources.”
We expect this initiative to be highly catalytic,” said Oliver Knight, Senior Energy Specialist at ESMAP. “Resource mapping is a crucial step in providing the resource and policy certainty that commercial developers need to scale up investment in renewables. In addition, government authorities will be better informed in negotiations on specific projects, and donors will have a clearer sense of the data and capacity needs, as well as the renewable potential, of clients.”
As well as mapping, the program will support a wide variety of activities, including consolidation and validation of existing datasets, work to standardize resource assessment methodologies, and capacity development of local institutions and experts. An open data repository will be developed to facilitate free and open access to the data, and the geospatial outputs (GIS layers) will be made available via a new web portal. The outputs will also be made available to the Global Atlas for Solar and Wind that has been developed by the International Renewable Energy Agency (IRENA) and the Clean Energy Ministerial.
The program is one of a number of initiatives the World Bank Group is undertaking in support of the global Sustainable Energy for All (SE4ALL) campaign. One goal of the initative is to double to the share of renewable power in the global energy mix from 18 percent to 36 percent by 2030. According to the SE4ALL Global Tracking Framework report produced by a multi-agency team led by the World Bank and released on May 28, renewable energy (excluding biomass) made up only 1.6 percent of total final energy consumption in Sub-Saharan Africa, and 1.8 percent in Southern Asia, as of 2010.
“The resource mapping initiative will open a floodgate of possibilities for both large and smaller investors, as well as for consumers who desperately need new energy options,” Arif Alauddin said.
Power generation from biomass gasification could help meet a significant portion of Pakistan’s industrial energy needs, Federal Minister of Information, Senator Pervez Rasheed, said on Friday.
Rasheed was speaking as the chief guest at the inception workshop of a new project for promotion of biomass gasification technology by the United Nations Industrial Development Organisation (Unido).
Biomass gasification is a process to generate cheap energy by burning organic material such as organic waste and wood among other things.
Rasheed said Unido’s efforts at developing a biomass project have immense importance for Pakistan. He said biomass gasification offers the most convincing alternate energy system for industries.
The project is likely to result in improved energy security and economic growth in the country, the minister said.
The four-year “Promoting Sustainable Energy Production and Use from Biomass in Pakistan” project is funded by $1.82 million from the Global Environment Facility – an international institution that provides grants for environment-related projects.
Another $5.3 million will be provided by Unido, Small and Medium Enterprises Development Authority (Smeda), Pakistan Poverty Alleviation Fund (PPAF), Sindh Agriculture and Forestry Workers Coordinating Organisation (SAFWCO), Centre for Energy Systems at the National University of Sciences and Technology (CES-NUST) and other entities from the Pakistani private sector.
The project’s finances will be used to develop three separate “demonstration projects” in Kamoke and Jhelum in Punjab, and Thatta in Sindh, which will generate overall 4.3 Megawatts (MW) from biomass gasification technology, said Muhammad Ahmad, the National Project Manager for the project.
The demonstration projects include a 3 MW rice husk gasification power plant in Kamoke, a 1 MW Wood Residue gasification power plant in Jehlum and a 0.3 MW electricity provision to a village near Gharo in Thatta.
Ahmad said the project aims to promote biomass gasification in Pakistan as a means to decrease the country’s demand and supply gap in the power sector.
“We want to build the capacity of local manufacturers so they could produce gasification technologies for electricity generation,” he said. “The demonstration projects could help us tell investors that power generation through biomass gasification is economically viable and can be replicated.”
Small and medium enterprises (SMEs) and other industries could use biomass gasification to generate their own electricity and this would help industries avoid the negative impact of the power crisis, he said.