Green

The EPA is getting closer to unveiling the final versions of its Clean Power Plan, which targets existing power-generating sources in the United States, and the US manufacturing community has expressed many concerns over the CPP.

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Learn about the cost impact of proposed rule on US manufacturing industry, including steel production.

However, there is some indication that EPA may make three significant changes to the proposed rule before it finally hits the books, which could alleviate cost- and compliance pain for US businesses:

  1. Easier interstate greenhouse gas emission credit trading

This would get closer to making good on EPA’s promises for a more “flexible rule” by allowing states to trade emissions credits amongst themselves without officially creating a cap-and-trade program, which would be more costly and create barriers to participation, according to Adam Riedel’s article in JDSupra Business Advisor.

  1. EPA may adjust state-specific emission reduction targets

Essentially, this would alleviate the effects that the most manufacturing-economy-dependent states would feel from the proposed rule, since those states would have been disproportionately affected by the emissions targets. It’s pretty clear that EPA overestimated the ease with which some of these states would be able to switch to natural-gas-fired plants, or access renewable energy for its (in many cases non-existent) infrastructure. Also, the “early mover” states that already began carbon reduction initiatives would have been unfairly hit by the initial emission reduction targets.

  1. EPA may adjust – or remove entirely – the binding interim emission reduction targets

This is exactly the issue that Lanny Nickell, VP of Engineering at Southwest Power Pool, told MetalMiner in an interview he is most concerned about: the virtually unachievable turnaround for interim emissions target goals to be met by 2020, before final goals must be met by 2030.

“Our concern is that the EPA is allowing the states to develop plans to comply with both the interim goals and the final goals, but those plans can be developed as late 2018,” Nickell said. “So if you think about the fact that fairly significant actions have to take place as early as 2020, the period of time between 2018, which is when they will, in theory, complete their plan, and 2020, which is when it would have to be implemented, that’s not a lot of time to build replacement generating capacity.”

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He continued, “And it’s not nearly enough time to build transmission infrastructure that would be needed to support any new generation or any change in use of the existing generation capacity that we have.”

But Here’s the Most Interesting Part:

Legal experts are essentially calling the current period ‘the eye on the storm.’ In other words, as Adam Riedel writes on behalf of Manatt, Phelps & Phillips, LLP, “Although the past year has been a relatively tranquil period of waiting and speculating” – as we at MetalMiner have been doing! – “regarding EPA’s regulation of greenhouse gas emissions from power plants, the finalization of EPA’s rules is likely to usher in a transformative period for large sectors of the economy that will last until at least the end of the current administration.”

Which means, folks, get ready to strap yourselves in for a fun ride – and check back in with MetalMiner after the final rule has been announced for in-depth follow-ups on the legal challenges to the final rule of the EPA Clean Power Plan.

RELATED: For now, enjoy some well-informed speculation on the costs and effects of the plan.

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The leaders of the Senate Energy and Natural Resources Committee unveiled an energy reform package Wednesday that includes major policy priorities from both Republicans and Democrats.

Sen. Lisa Murkowski (R-Alaska), chairwoman of the panel, released the Energy Policy Modernization Act of 2015 Wednesday along with Sen. Maria Cantwell (D-Wash.), the committee’s top Democrat.

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The bill would set a deadline for the federal government to decide whether to approve or deny applications to export liquefied natural gas, indefinitely renew the government’s conservation funding program and push toward an electric grid that is better prepared for cyber security and renewable energy, among other provisions.

Mine Permitting Reform Included

Among them was an overhaul of the federal mine permitting process. The bill also includes budget increases for geological surveying. The committee repeatedly emphasized the bipartisan nature of the compromise, which avoided hot-button issues like exporting crude oil, a priority for republicans but something that democrats have previously staunchly opposed.

The bill would achieve republican priorities such as eliminate outdated or redundant mandates such as the long mine permitting process, and deliver on democratic priorities such as encouraging energy efficiency in federal and commercial buildings, modernizing the electric grid and shoring up its ability to adjust to an increase in renewable energy, among other policies.

The bill was announced on the same day that the House voted to approve its own energy package, a bipartisan bill that is much less ambitious than the Senate version. It is believed that the bills could be reconciled in a House-Senate conference.

A Game Changer for US Industry

The mining and energy modernization aspects of the bill are not just necessary, but crucial to the survival of both metals and manufacturing businesses. Changing the federal permitting process has long been the objective of US-based miners such as Molycorp and federal dollars for upgrades of regional energy grids has the potential to greatly expand renewable energy generation. If this bill can secure the bipartisan votes it was designed to capture then it can be a real game changer for US energy and manufacturing.

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A quiet revolution is going on in the US power generation market, and it may be giving a lesson for those countries dithering over whether to allow hydraulic fracturing (fracking) of oil and natural gas deposits identified but not yet proven.

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According to the FT, April was the first month in US history that gas-fired electricity generation surpassed coal-fired generation, (although it came close in 2012 when gas prices were also very weak). By comparison, in 2010 coal provided 45% of US power. In April of this year 31% of US electricity was generated by natural gas compared to 30% for coal, and the trend continues.

Watts Up

In gigawatt terms, wind power is growing even faster than natural gas, flattening the latter in the league tables. US coal capacity dropped by about 3.3 GW during 2014, and the US Energy Information Association predicts it will shrink by a further 12.9 GW this year, while wind power capacity rose by 9.8 GW and gas by 4.3 GW.

Source FT

Source: Financial Times

The reasons are more complex than simply low natural gas prices, although that, undoubtedly, is a major factor. The Environmental Protection Agency’s failed attempt to force environmental compliance by the back door this year encouraged some coal-fired utilities to see the writing on the wall and either mothball plants or invest in new technology to accommodate the mercury emission and other pollution targets, raising costs.

Brett Blankenship of Wood Mackenzie is quoted by the FT as saying, “low gas prices mean coal plants are running less, and when they run their margins are typically compressed. So companies find it difficult to make the investments needed to comply with regulations and keep those plants running.”

The Imitation/Substitution Game

It’s a vicious downward spiral in the face of lower-priced and less-polluting competitor fuels. Although natural gas makes a better swing fuel source to balance wind and solar renewables variability, not all utilities are blessed with an abundance of such spare generating capacity so they rely on their coal power plants to step in at times of peak demand. Unfortunately, running a coal plant at anything other than full or near-full load on a continuous basis brings per-gigawatt operating costs up AND per-gigawatt emissions of pollutants.

Not surprisingly, coal producers share prices have fared even worse than shale gas companies. Peabody Energy’s share price, the largest US coal producer, has fallen 98% since April 2011, while those of Arch Coal have dropped 99.2% and of Alpha Natural Resources by 99.6%, while their debt is so devalued it is yielding 17.9% for Peabody suggesting investors are expecting default.

With natural gas prices set to stay low for some years to come and renewable costs falling steadily the writing is on the wall for all but the latest and most efficient coal-powered electricity production. At least the environmental lobby will be pleased and the EPA may have achieved much of what it set out to do, Supreme Court slap down or not.

This September: SMU Steel Summit 2015

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After months of rancorous trade battles, a funny thing happened to the crystalline silicon solar photovoltaic panel market. Prices in market leader Europe suddenly went up. For the first time in a decade.

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Prices for solar panels in the European spot market have risen by about 6% so far this year, according to pvXchange, a solar market consultancy based in Bremen, Germany.

Renewables_Chart_July-2015_FNLFlat is the New Up!

Our monthly Renewables MMI® doesn't track panel prices per se, only the silicon raw material that goes into them, but still registered a value of 58 in July, on par with June's value. Flat is the new up in this bearish commodity market.

Despite the modesty of the increase, it's a huge turning point for European solar as the increase represents an abrupt reversal of historical trends. In 2011, the average price of a solar panel in Europe fell by nearly one-third compared to the previous year. In 2012, solar panel prices in Europe plunged by nearly another third. Just last year, the price of a solar panel in Europe fell by more than 14% compared to the previous year.

What's even more astounding is that this increase could have been caused by the real price of silicon finally being quoted in a majority of European retailers. We have long lamented that government subsidies for both silicon exports in China and for local solar installation in destination markets have artificially eroded the price of silicon.

Tariffs to the Rescue?

A trade war was waged in the US largely between Germany's Solarworld, Inc., and small Chinese manufacturers who received government support for silicon exports at home and possible kickbacks abroad from installers who specified their thin-film products over higher-quality silicon products from companies such as SolarWorld. The real price fight, though, was always in Europe where solar could make up 12% of power generation by 2030.

The European Commission renewed their own tariffs on Chinese silicon recently and it looks like those duties were finally enough to keep the cheap imports out of their markets. A robust European solar market is good news for silicon refiners and producers such as Solarworld as higher prices mean more profitability for them.

It's too early to tell if this turnaround will ever be felt in the highly subsidized the US market, but it's certainly a good sign.

The Renewables MMI® collects and weights 8 metal price points used extensively within the renewable energy industry to provide a unique view into renewable energy metal price trends over a 30-day period. For more information on the Renewables MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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Hawaii’s blessing is also its curse.

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So successful has the state’s switch to renewable energy been that at times the small island grid systems are creating too much energy, or conversely, others are generating too little. Unfortunately, the significant swings in power supply cause enormous system management problems. Hawaii is not alone of course, the islands display a microcosm of what most countries with a significant proportion of renewable power generation suffer: coping with the variability of renewable power supply.

According to the WSJ, though, the smaller the grid the harder it is to manage and they don’t get much smaller than Hawaii’s. Every island has its own grid, none of them connected to any other, compared to the US mainland where just three grids cover 48 states.

The larger the grid, the more capacity it has to absorb fluctuations in power levels. The islands still burn oil for 70% of their power pushing power costs to 34 cents per kilowatt-hour; as a result there has been a massive adoption of solar panels and wind turbines. On Oahu 13% of residential utility customers have solar panels, unprecedented in the US, even compared to green California or super sunny Arizona.

Source: WSJ

Source: Wall Street Journal

In Hawaii, at any time, up to a third of power could be coming from renewables. If a cloud passes, power levels fluctuate significantly. On Maui, the WSJ reports peak electricity demand is about 200 megawatts. The island has 150 megawatts of renewable capacity, half of it consisting of wind turbines. That means sometimes as much as 75% of power generated comes from variable sources like the wind and sun.

Fortunately, recent changes to the local grid make the power being produced more manageable and sensors give utility operators a little more warning when sunshine or wind levels rise or fall but the biggest benefits will come from being able to store excess power.

Being able to smooth out peaks and troughs by storing and releasing power will enable the existing grid to cope much better with changes in supply and existing conventional generators to operate more efficiently. It’s staggering that it has taken this long for utilities to install significant storage capacity, the problem is well known elsewhere but rarely as acute as in Hawaii. One of the utilities is seeking bids to create 300 mw of energy storage on the most populated island, Oahu. With such favorable economics and such acute power management challenges, the surprise is that it’s taken this long.

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The job of 3D-printing the world’s first office building is being tackled and 27 states have filed a lawsuit against the EPA over new clean water rules.

3D-Printed Office Building

Plans have been made to 3D-print a 2,000-square-foot office building – along with the furniture for its clients. Shanghai design company Winsun Global will work with architecture firm Gensler, structural engineer Thornton Tomasetti and construction manager Syska Hennessy Group on the project and plans to use reinforced concrete, fiber-reinforced plastic and glass-fiber-reinforced gypsum in a 20-foot-tall 3D printer. The project should require up to 80% less labor and could reduce construction waste by as much as 60%.

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Winsun previously 3D-printed a house and an apartment building using similar materials and methods.

27 States Suing EPA

Several lawsuits have been filed by 27 states against the Environmental Protection Agency‘s expanded water rules. The states are concerned that the EPA violated the Clean Water Act and other laws when it extended its authority. The separate suits are expected to be combined into one case in federal court.

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Silicon is essentially sand. But for use in semiconductors and solar panels it needs to be refined to a purity of 99.99999 %. This makes the second-most abundant resource in the world a commodity as its availability is limited by worldwide refining capacity.

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We have long lamented the trade war going on over refined silicon over the last few years. Big companies such as German-based multinational Solarworld, Inc., want higher prices, saying their panels are of higher quality than those offered by smaller, mostly Chinese, producers.

US Factory Capacity Increasing

Installers in US markets are reaping a windfall by using the cheaper panels for installations that are subsidized by states such as California and the low cost of the cheap imports. While it was kind of funny to see Solarworld wrap itself in the flag when it successfully petitioned the Commerce Dept. for tariffs on Chinese panels, and then Chinese silicon, itself, Solarworld has simultaneously stepped up its US presence and seems to be willing to fight for the US market.

Meanwhile, Elon Musk's SolarCity, an entirely American-owned operation, is building a massive $5 billion
"gigafactory" in Buffalo, NY. When the silicon solar panel factory is completed and running full-tilt (projections within two years), it will be the biggest solar panel plant in North America. To run at full speed, the plant will need an elaborate network of suppliers and service firms to support it.

Is Domestic Demand There Yet?

Is there enough solar demand for companies like SolarCity and SolarWorld to get their prices increases AND see sales grow? A significant price spike in silicon in the renewables MMI this week is certainly a step in the right direction. The tariffs placed on Chinese panels and silicon seem to be having the desired effect, as well. The European Union renewed similar duties this week, essentially stifling Chinese exports to the West with high tariffs in both markets.

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The renewables market lost ground again this month, going from being an unspectacular but steady market to just an unspectacular one. It's even now from the range it had been hovering in since last November.

Renewables_Chart_June-2015_FNL

The monthly Renewables MMI® registered a value of 58 in June, a decrease of 3.3% from 60 in May.

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What's concerning is that while we certainly didn't expect renewables to break out and hit new highs this year, they've actually lost significant ground compared to late 2014 when the range hovered between 60 and 70. 58 is a new all-time low. We can only chalk this drop up to more incentives for end-use products using silicon in the solar market and the overall weakness in the rare earths market for neodymium.

In California this month, a state cap-and-trade program is now giving away crystalline silicon photovoltaic panels to low-income homeowners. While this will certainly help adoption, it won't do any favors to companies such as SolarWorld, Inc. which are trying to bring prices of the panels, and silicon itself, up to achieve higher profit margins.

Silicon will also inevitably feel the pinch from a wave of mergers in the semiconductor industry that will force the involved companies to adopt better procurement and lean operations principles.

The more interesting renewable market is that of grain-oriented electrical steel. While the US GOES price actually went up this month, the GOES M3 price, a much better indicator of actual purchasing activity, went down. More on that tomorrow.

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We at MetalMiner have long covered the US domestic policy front as pertains to US manufacturing industries, and time and again, we hear industry experts extolling the virtues of “all-of-the-above” strategies, rather than unilateral regulatory decrees.

So is the federal government, in conjunction with individual states, pursuing “all-of-the-above” strategies to their fullest potential when it comes to US energy policy?

As the final rule of the EPA Clean Power Plan gets closer to being finalized (word on the street: it’s happening this summer), we got an insider perspective from Michael Whatley at Consumer Energy Alliance on the issues for US manufacturers surrounding the potential effects of the final rule. Below is a condensed and edited version of our conversation.

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One could, and many will, dismiss the International Monetary Fund report “How Large Are Global Energy Subsidies,” as so much drivel, that, while there are undoubtedly costs to burning fossil fuels, due to health and pollution, the energy industry also pays huge amounts of taxes and provides low economic cost energy that allows our economies to function.

Why Manufacturers Need to Ditch Purchase Price Variance

Whatever we may or may not think of the validity of this argument we should remember the IMF rarely deviates from the thinking of the US Treasury. If the IMF have gone public with this approach it will have widespread support among influential circles.

Subsidies and Energy

The basis for the IMF’s case is that fossil fuel companies have been allowed to keep huge profits while dumping the consequences on the rest of society, and that the only way to dissuade this practice is to tax the fuels sufficiently to compensate society, an analytical approach developed by Arthur Pigou, an early 20th century economist according to the London Telegraph newspaper.

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