Home' Trinidad and Tobago Guardian : June 18th 2015 Contents JUNE 2015 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
INTERNATIONAL | BG21
How far renewable energy can
develop without further sub-
sidy is one of the world s
hottest questions. It will need
to become a lot more eco-
nomic if the world is to stop
using fossil fuels by 2100, as rich-world leaders
promised at the G7 summit in Germany this
Transforming the promising niche business
of renewable energy into the engine of the
world s economy is a daunting task. Hydro-
electric generation can produce lots of power
at low cost, but room for growth is constrained
by environmental objections and a lack of
dammable valleys in the right places. Tidal
power is too new and so far looks too costly.
Biomass (such as wood), like biofuels, will
require a great deal of land to produce much
Great while the sun shines
Some see these drawbacks as a reason to
plump for nuclear power, though its cost over-
runs make it unattractive. Others focus, there-
fore, on the two forms of renewable energy
generation that have done best in recent years,
solar and wind power. Growth rates are impres-
sive: solar-energy generation grew by 38.2 per
cent last year, according to statisticians at BP,
an oil firm whose annual energy review came
out this week. But the growth is from a very
small base. Solar, wind and the like met 0.9
per cent of global energy use a decade ago;
that has risen to 3.0 per cent now and will
reach 8.0 per cent by 2035, according to BP s
To make that picture brighter, costs will
have to plummet. Wind offers less scope for
this (bigger windmills are more efficient, but
costly to make and build). Solar is what most
cheers the optimists. It can work at any scale
from a modest panel placed on the roof of a
house to a giant array. The plunge in costs in
previous years seems broadly to be continuing.
Steve O Neill of REC, a producer of solar sys-
tems, said his costs are falling by one per cent
a month, thanks to cheaper ways of making
silicon wafers and to economies of scale. The
circuitry that goes with solar panels, and the
cost of installation, are also getting cheaper.
Consultants at McKinsey said the cost of
installing a watt of solar generating capacity
could halve over the next five years.
Solar is no longer just a creature of subsidies
(such as the 30 per cent investment-tax credit
it gets in America, along with the right to feed
spare power back into the grid at the retail
price). In the sunniest parts of the world it
competes well with natural gas, even where
that fuel is very cheap.
But the cost of solar power is not just about
the systems that households and businesses
install. On cloudy days and at night, they need
power from elsewhere: either from storage of
some sort, or from the grid. Who will pay for
it? Backup generation, and the grid infrastruc-
ture across which it flows, become increasingly
uneconomic as consumers generate more of
their own power (and thus pay less to other
providers). A recent report from the Massa-
chusetts Institute of Technology notes that
solar power s success therefore risks being
Better and cheaper batteries are one answer:
Surplus solar power generated while the sun
shines can be drawn down when it is dark.
But there is some way to go on this. Even the
largest of the new generation of battery kits,
the much-trumpeted Tesla Powerwall, costs
US$7,140 to install and stores only 10 kilo-
watt-hours - not nearly enough to heat or
cool a typical home.
Another option is thermal storage: using
surplus power to heat or freeze water, which
can then be used to warm or cool a building
when needed. This is cost-effective, but only
a partial solution. The stored energy cannot
be easily transported, and heating and cooling
are only part of consumers power needs.
The real solution to intermittent power gen-
eration (whether solar or wind) is bigger and
more flexible grids, with interconnections that
cross corporate and international boundaries.
The bigger the geographical area a power net-
work covers, the greater the chance that sun
or wind electricity generated in one place can
be matched with demand elsewhere (though
there would still need to be substantial spare
capacity). But incumbent power companies
may balk at investments that erode their pricing
There are parallels between the disruption
that solar power threatens to cause in the elec-
tricity industry and the upheaval that America s
shale drillers have already brought about in
the fossil-fuel business. A study by Wood
Mackenzie, a consulting firm, says solar s
impact could indeed be "comparable" to that
of shale gas.
But this very abundance of gas in North
America---and perhaps elsewhere one day, if
fracking gets cracking---means that except in
the sunniest climes, solar power will face stiff
competition from gas-fired power stations.
Analysts at Wood Mackenzie have estimated
that the unsubsidised capital cost of small-
scale residential solar capacity will still be
twice as costly as modern gas-powered gen-
eration by 2030.
Larger, utility-scale solar arrays will be com-
petitive by 2025, however.
Solar power has so far confounded its
doubters. And whereas the cost of oil and gas
can go up as well as down, solar s cost will
only keep falling. But for it to keep increasing
its share of electricity generation without caus-
ing a collapse in power markets, let alone for
it to banish fossil fuels altogether, there will
need to be significant progress in energy stor-
age, and in building grids better suited to a
world of intermittent sources of power.
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
As of the end of May, the Shanghai Stock
Exchange had a total market cap of US$5.9
trillion while the Shenzhen Stock Exchange
clocked in at US$4.4 trillion, according to
the World Federation of Exchanges.
That means there s at least US$10.3 trillion floating in China s
stock market right now, as both stocks in Shanghai and Shen-
zhen have surged further in June.
China s stock market has rocketed this year to astonishing
new highs. The benchmark Shanghai Composite is up nearly
60 per cent since January 1, and the Shenzhen Composite has
jumped by 120 per cent, easily making it the world s best-
The crazy rise has pushed the Shanghai Stock Exchange up
the ranks to become the world s third-biggest by market cap,
behind the New York Stock Exchange at nearly US$20 trillion
and Nasdaq at US$7 trillion.
Markets have spiked despite slowing economic growth in
China; first quarter GDP came in at seven per cent, the worst
since the financial crisis. Still, investors remain optimistic that
Beijing will step in to support the flailing economy.
The central bank has already taken some steps, announcing
interest rate cuts and lowering the amount of cash banks must
keep on reserve, a move meant to help the economy by freeing
up money for loans. Economists expect the government to do
more in coming months.
Much of the money rushing in to stocks is coming from
individual investors; many of whom had previously sunk
savings into the real estate market. But now, the housing
bubble is deflating, and they re piling into stocks.
Eighty-one per cent of retail investors in China trade at
least once a month, according to a State Street survey published
earlier this year. That s the highest of any country on the
planet; just 53 per cent of Americans and 32 per cent of French
investors say they trade monthly or more often.
There s so much investor interest that BNP Paribas estimated
that about 170,000 new stock trading accounts were being
opened each business day in China at one point this year,
more than 10 times the average for 2014.
Plus, a few other government initiatives have bolstered
interest in China s markets.
The government recently unveiled a plan to allow Hong
Kong mutual funds to be sold on the mainland for the first
time. Nearly 1,000 funds qualify for the scheme which will
allow foreign investors to tap China s fast growing consumer
sectors, and vice versa, Macquarie China economist Larry Hu
wrote in a research note.
This programme, along with a similar scheme launched last
year connecting the Hong Kong and Shanghai markets, gives
investors more channels than ever to make financial investments
Despite China s stock rise and various government efforts
to open up its markets, index provider MSCI said last week
that it s still not ready to include Chinese stocks in its global
Here are the top stock exchanges by market cap:
New York Stock Exchange: US$19.7 trillion
NASDAQ OMX: US$7.4 trillion
Shanghai Stock Exchange: US$5.9 trillion
Japan Stock Exchange---Tokyo: US$5 trillion
Shenzhen Stock Exchange: US$4.4 trillion
Hong Kong Stock Exchange: US$3.96 trillion
Euronext: US$3.5 trillion
Source: World Federation of Exchanges, data as of end-May.
BANISHING THE CLOUDS
To threaten fossil fuels, solar power must solve its intermittency problem
China's stock market
is now worth over
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