Bank of America Merrill Lynch has helped Australian project developer Cool nrg International secure a climate finance agreement in Mexico that will enable it to step up its distribution of energy efficient lighting in that country. The agreement, which includes a “first-of-its-kind” carbon royalty agreement, and also involves a Mexican government trust established to promote energy efficiency in Mexico, will enable Cool nrg to scale up its activities and deliver 45 million compact fluorescent light bulbs in the Mexican residential sector.

It says this will reduce greenhouse emissions by 16 million tonnes over 10 years and deliver energy savings of 33,000HWh over the same period, while also deferring the need for up to 1,740MW of capacity. The deal extends an earlier agreement with Mexico to establish the world’s first “programmatic” project under the Clean Development Mechanism, which generates international carbon credits of the type that Australian companies will likely buy as the domestic carbon price moves to a market-based mechanism. Programmatic refers to a program with small-scale activities, such as changing light bulbs, undertaken on a large scale. This deal will generate around $160 million of credits at current market prices.

"This project in Mexico shows the value of programmatic CDM when combined with domestic energy efficiency,” Cool nrg chairman Nic Frances said. “Not only does it help to cut carbon output but it also increases energy security and, uniquely, delivers extraordinary benefits for Mexican families.” He said he is hopeful it will be the forerunner of similar projects in other emerging economies.

The complex royalty agreement negotiated by Merrill Lynch gives the Mexican government a share of the profits from the credits, in the same way as a state government in Australia gains royalties from mining operations. Merrill Lynch’s head of carbon markets Abyd Karmali said the use of the innovative royalty arrangement was as an example of the type of public-private partnership necessary to unlock greater flows of low-carbon finance from the private sector.

Ceramic's taps markets

Ceramic Fuel Cells is seeking to raise more than $30 million from a placement of shares and a rights issue as it seeks to ramp up production of its high efficiency and low emission electricity generation products for homes and other buildings. CFC has already raised $5.9 million in a placement to investors, and is now seeking to raise a further $21.7 million in a one-for-four rights issue to investors in Australia and New Zealand, and a further $3.3 million for investors overseas.

The company said it now employs more than 125 people, has completed the initial development of its fuel cell products, and has begun to generate larger volume orders. “The directors believe that now is the time to invest in actions that will drive down the unit cost of the company’s BlueGen and Gennex units and increase volume manufacturing of these products,” it said in a statement. The company last week also announced an MOU for a potential manufacturing agreement with Jabil Circuit, which will look at lifting manufacturing volumes and scaling down costs. Jabil has struck a similar deal with Australian battery storage manufacturer Redflow.

The rights issue is being pitched at 10.8 cents per share, a discount of 13.8 per cent to its trading price of around 12c before the announcement on Friday. The issue is being handled by Nomura Securities, but it is not underwritten. Its prospectus said if it was only successful in raising $10 million or $20 million, then its ability to meet future large orders and achieve the scale of manufacturing cost reductions that it envisages could be compromised.

The power of seven

A group of seven major Australian companies has submitted a proposal to the Australian Energy Market Commission, suggesting changes to the National Electricity Rules to make electricity prices fairer and lower. The companies – Amcor, Australian Paper, Rio Tinto, Simplot, Wesfarmers, Westfield and Woolworths – developed and submitted the changes with the aid of the Energy Users Association of Australia (EUAA), of which they are all members. It is estimated that their suggested changes would eventually see revenues of network service providers in the National Electricity Market cut by around $1.1 billion a year, with average electricity price reductions of around 6 per cent.

The companies’ proposal comes on the heels of a similar package of proposed rule changes delivered to the AEMC by the Australian Energy Regulator. But, as EUAA head Roman Domanski noted on Sunday, of the more than 160 proposals for rule changes that have so far been submitted, this is the first to come directly from energy users. “The EUAA believes that this is an indication of the level of concern felt by energy users about the flaws in the existing regulatory regime and the need for something to be done to correct them,” Domanski said. “As a result, there are now two significant rule change proposals before the AEMC regarding network prices.”

Domanski said that the companies’ proposal, in essence, was that the allowed return on debt should reflect the actual cost of debt. “The current arrangement in the Rules is that the return on debt is based on a benchmark that does not reflect the actual cost of debt to network businesses. This is unfair and has a large bearing on network prices,” he said. “It gives the network businesses a significant regulatory windfall over what they actually pay for debt. As this is passed through into higher electricity prices, consumers are paying a lot more than it actually costs the network monopolies to finance debt.”

Solar fail

The results are in from the review of NSW’s ill-fated Solar Bonus Scheme, with the NSW Auditor General’s Report finding that the state government and its agencies grossly underestimated the cost and number of people that would install systems under the incentive. In his findings, Auditor-General Peter Achterstraat found that if the scheme had continued unchecked, its estimated cost would have reached $3.988 billion by October 2010 – more than 10 times the original estimate of $362 million. As it was, the gross tariff for new applicants was reduced from 60 to 20 cents in late April – a cut that was retrospective for a short time – with the latest government projection for the total tariffs to be paid over the life of the Scheme estimated at $1.75 billion. But Archerstraat, who criticised the scheme for being badly designed and poorly managed, said his estimates of the sheme's total cost were a good deal lower, at between $1.25 billion and $1.44 billion.

“The Scheme lacked the most elementary operational controls, had no overall plan and risks were poorly managed,” Achterstraat said on Monday. “I anticipate that the total tariffs to be paid under the Scheme will be between $1.05 billion and $1.75 billion,’ he said. “The government’s projected Scheme cost is at the upper end of this range. This is mainly because it has assumed very good energy output from the Solar panels over seven years.” Achterstraat pointed to the many variables that make it difficult to be certain about the cost of the Solar Bonus Scheme: Changing weather patterns, the orientation of the solar cells to the sun, shading, and the quality of products and their installation all effect performance. “The New South Wales Scheme was far more generous than other States and contributed to many more people joining the Scheme than were expected,’ said Achterstraat. It was a statutory requirement that the government review the scheme when 50 mega watts of installed capacity was reached. But by the time the review was completed, installed capacity had reached 101 mega watts.

Going to California

Australian firm Carbon Training International says it has signed a deal to export its carbon management courses to the University of California, as that state prepares to introduce its own carbon pricing scheme. CTI executive chairman Bruce Thomas says the carbon management course will be delivered through through UCLA Extension, a leading provider of business education in California. The first course will be delivered in January.

Thomas says it will be the first carbon management course in the US and will assist business and communities adapt to the cap-and-trade regulation that comes into effect in 2013 in California. He says California represents a significant market opportunity for CTI, as both the Californian economy and population are 50 per cent larger than Australia’s. “The UCLA initiative is an example of how innovation and market leadership is providing export opportunities for Australian business, delivering new skills and capabilities to both developed and emerging markets,” he says.