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German industry turns to solar in race to cut energy costs

German industry turns to solar in race to cut energy costs

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German industry turns to solar in race to cut energy costs

For months, Philip Matthias tried to convince his father to install solar panels on their company’s roof in the eastern German state of Thuringia, aiming to cut electricity costs and carbon emissions at the metal products factory.

Initially sceptical of the 2.3-million-euro ($2.5 million) investment, a substantial sum for the medium-sized Tridelta, his father crunched the numbers and decided to nearly double the project capacity, opting to install photovoltaic modules that could power around 900 households in addition to the factory.

“The PV systems amortize after about 7-1/2 years. The manufacturer gives a guarantee of 20 years. That means this is an extremely lucrative investment,” Matthias told Reuters.

Since the war in Ukraine and the sudden drop in Russia fossil fuel exports to Germany, Berlin has introduced laws to accelerate solar power expansion, part of its plan to cover 80% of the country’s energy from renewables by 2030.

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Encouraged by a feed-in tariff providing a guaranteed price to renewable energy producers selling their power, as well as reduced solar panel costs, German companies are increasingly turning to solar to get around high energy costs.

Although Germany has Europe’s biggest capacity of solar and wind power generation, its small and medium-sized companies have yet to benefit from lower electricity prices because of high grid fees and taxes they must pay. By generating their own solar power, they avoid those fees and taxes.

Companies consumed around 69% of Germany’s national electricity in 2023, data by the BDEW utilities association showed.

“As electricity prices in Germany show no signs of decreasing as previously anticipated, companies are increasingly recognising the economic viability of installing solar panels,” said Marie-Theres Husken, an energy expert for the BVMW association for small- and medium-sized businesses.

CORPORATE SOLAR SHIFT

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Newly installed photovoltaic capacity on business rooftops rose by 81% year-on-year in the first four months of the year, outpacing the 1% growth in the residential sector, data by the BSW solar power association shows.

A May survey by pollster YouGov showed more than half of German companies with suitable roofs planned to install solar power systems in the next three years. BVMW forecasts that nearly all manufacturing companies in Germany will use solar energy by 2030.

In response to increasing demand, Germany’s largest residential solar power developer, Enpal, said in April it was expanding into the commercial sector.

“The demand was not as instant… but the growth is going to be very sustainable,” Melchior Schulze Brock, CEO of commercial and industrial solar startup Enviria.

An April study by the Freiburg-based Institute for Applied Ecology showed there was potential to install up to 287 gigawatts (GW) of solar capacity, more than enough to meet Berlin’s 2030 target of 215 GW, along German roads, railways, parking lots, and industrial areas. This could significantly reduce reliance on agricultural land where permitting and planning approvals can take up to a decade.

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A drop in solar panel prices globally since last year has spurred companies to embrace solar energy.

“The market is overrun with cheap but good panels from China. That means that the system that we are building now is about 20% cheaper than a year ago,” Matthias said.

A German legislative package passed in April easing regulation and increasing subsidies for large rooftop systems as well as a pending tax investment reform for real estate funds operating rooftop solar panels, is expected to drive demand further.

State feed-in subsidies for large scale rooftop photovoltaic projects, introduced in 2021 and which are selected via tender, have also boosted the trend.

The last tender for the subsidised projects in February saw a 107% rise in the number of offers year-on-year, data by the federal grid network agency showed.

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A feed-in tariff of 9.3 euros cents per kilowatt-hour, higher than Tridelta’s power purchasing price, makes it currently cheaper for the company to sell future generated electricity to the grid and buy it back, Matthias said.

Germany’s economy ministry declined to comment on companies’ electricity trading strategies.

“There’s a high correlation between the feed-in tariffs and the build-up of solar PV roof top projects,” Hugo Willink, Executive Director at solar roofs developer Sunrock told Reuters.

Sunrock, which won an order from Mercedes Benz in May to build a 23-megawatt solar project on the carmaker’s factory roofs, sees Germany as its core market for the coming year.

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Oil market likely to be in surplus next year, Morgan Stanley says

Oil market likely to be in surplus next year, Morgan Stanley says

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Oil market likely to be in surplus next year, Morgan Stanley says

The crude oil market is currently tight but next year will likely be in surplus, with Brent prices declining into the mid-to-high $70s range, Morgan Stanley said.

The tightness will hold for most of the third quarter, the bank said in a note dated on Friday, but equilibrium will return by the fourth quarter, “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth.”

Three sources told Reuters last week that OPEC+ is unlikely to recommend changing the group’s output policy at a mini-ministerial meeting next month, leaving in place a plan to start unwinding one layer of oil output cuts from October.

Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day (bpd) in 2025, well ahead of demand growth.

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Refinery runs are set to reach a peak in August this year, and unlikely to return to that level until July 2025, it said.

Morgan Stanley left its forecast for Brent crude prices for the third quarter of 2024 unchanged at $86 per barrel. Earlier this month, Goldman Sachs also maintained its projection for the quarter at an average Brent price of $86 a barrel.

Brent crude prices on Monday were up 0.54% at $83.08 a barrel by 0535 GMT, and US West Texas Intermediate crude futures were up 0.54% at $80.56. 

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Asia stocks skid as China trims rates; Biden steps aside

Asia stocks skid as China trims rates; Biden steps aside

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Asia stocks skid as China trims rates; Biden steps aside

Asian shares slid anew on Monday, getting little lift from a surprise rate cut by China’s central bank, while Wall Street futures firmed in the wake of President Joe Biden’s decision to bow out of the election race.

The People’s Bank of China cut short-term rates by 10 basis points, which pulled down long-term borrowing costs and bond yields. The move follows Beijing’s release of a policy document on Sunday outlining its ambitions for the economy.

Investors seemed underwhelmed with the move, in part as it only emphasised how weak the economy was, and Chinese blue chips slipped 0.9% along with the yuan.

“Basically all the fundamental factors point to the fact that China needs a lower rate environment, especially the real rate is really high…in this kind of disinflationary environment,” said Gary Ng, Asia-Pacific senior economist at Natixis in Hong Kong.

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“I think the general trend is that it’s pretty much in line with the fact that the economy is not that great, and it seems that there’s a bit of urgency from the authorities to stimulate it now.”

MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 0.7%, having shed 3% last week.

Japan’s Nikkei dropped 1.2% and South Korea’s benchmark index fell 1.3%. Taiwan was having another tough session with a loss of 2.3% amid concerns about US restrictions on chip sales.

Investors seemed much better prepared for news President Biden would drop out of the election race and endorse Vice President Kamala Harris for the Democratic ticket.

Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents. California governor Gavin Newsom, another possible Democratic challenger, trailed at 4 cents.

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Markets took the news in their stride, with S&P 500 stock futures nudging up 0.1%, while Nasdaq futures added 0.2%. Futures for 10-year Treasuries rose 2 ticks, while 10-year bond yields dipped 2 basis point to 4.22%.

EUROSTOXX 50 futures added 0.5%, while FTSE futures firmed 0.4%.

“As Trump’s polling results have lifted, markets have favoured positions that anticipate more trade barriers and possibly higher inflation,” ANZ analysts said.

“Some polls have Harris performing better than Biden against Trump, and the Democrats will be hoping the next polls feature a Harris-driven bump.”

EYE ON EARNINGS

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A packed week of corporate earnings will see Tesla and Google-parent Alphabet kick off the season for the “Magnificent Seven” megacap group of stocks.

Others reporting include General Electric, General Motors, Ford and Lockheed Martin.

The tech sector is projected to increase year-over-year earnings by 17%, while profit for the communication services sector is seen rising about 22%.

Such gains would outpace the 11% estimated rise for the S&P 500 overall, according to LSEG IBES.

Europe’s biggest banks also report this week, with eyes on whether the gains from higher interest rates have run out of steam and if recent political drama is weighing on sentiment.

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A busy week for economic news will culminate with the Federal Reserve’s favoured inflation measure out on Friday. The core personal consumption expenditures index is seen rising 0.1% in June, pulling the annual pace down a tick to 2.5%.

Markets are wagering heavily that a benign outcome will firm the case for a September rate cut, which futures are pricing as a 97% chance.

Also due are figures for advance gross domestic product that are forecast to show growth picking up to an annualised 1.9% in the second quarter, from 1.4% in the first.

The closely watched Atlanta Fed GDPNow indicator points to growth of 2.7%, suggesting some risk to the upside.

The Bank of Canada meets on Wednesday and is considered almost certain to cut its rates by a quarter point to 4.5%.

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In currency markets, the dollar gave back just a little of last week’s safe haven gains as the euro edged up 0.1% to $1.0886. The dollar was a fraction softer on the Japanese yen at 157.27.

In commodity markets, gold held at $2,406 an ounce and short of last week’s record high of $2,483.60.

Oil prices inched higher, with scant sign of progress on a ceasefire deal in Gaza as Israeli forces battled Palestinian fighters in the southern city of Rafah on Sunday.

Brent gained 44 cents to $83.07 a barrel, while US crude rose 41 cents to $80.54 per barrel.

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FinMin Aurangzeb set to visit China to reschedule $15 loans

FinMin Aurangzeb set to visit China to reschedule $15 loans

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FinMin Aurangzeb set to visit China to reschedule $15 loans

 In order to reschedul energy loans worth $15 billion, Finance Minister Muhammad Aurangzeb is all set to visit China for three days tomorrow.

The minister will discuss the loan rescheduling with the Chinese authorities. The minister will also discuss China’s energy circular debts worth Rs500 billion.

Read more: Finance Minister Aurangzeb leads delegation to US for IMF talks on new bailout package

The minister will also discuss Panda Bonds during the visit to get the $30 million bonds in China.

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