Good morning, ladies and gents. The news cycle is giving us a breather today, but earnings season rolls on with a splash of big investment news from PIF and Lucid. First, Chinese solar companies continue to struggle across the pond…

THE BIG CLIMATE STORY OUTSIDE THE REGION- SunPower throws in the towel on US operations: Chinese solar manufacturer SunPower has officially filed for bankruptcy in the US’ state of Delaware, listing its US assets and liabilities with a value between USD 1 to 10 bn. The company plans to wind down operations and has agreed to sell its Blue Raven Solar installation subsidiary and other units to US-based Complete Solaria for USD 45 mn. SunPower is seeking court approval for its bankruptcy by the end of September.

What caused its downfall? High interest rates and subsidy changes in California, the largest US market for solar, were a couple of the factors that hindered growth, Bloomberg writes. The company also defaulted on a credit agreement in 2023, restated earnings, and faced significant internal turmoil, including replacing its CEO, restructuring operations, and losing its accountant firm. SunPower's 2020 shift from manufacturing to rooftop installations backfired as inflation and high interest rates increased costs for consumers. Prior to filing for bankruptcy, the company halted new installations and shipments, leading analysts to lower share-price targets to USD 0.

The story grabbed ink in the international press: Reuters | Bloomberg | The Wall Street Journal | CNBC

WATCH THIS SPACE-

#1- Acwa will go live with four projects this year: Saudi Arabia’s renewables giant Acwa Power is set to commence commercial operations for four major projects worth USD 3.1 bn by the end of the year, according to the company’s investor report (pdf). The projects include three solar plants,the 1.5 GW Sudair solar plant — which the firm received the commercial operation certificate for in January — the 80 MW Laylaa solar plant, and the 700 MW Ar Rass PV plant, while the fourth is the Red Sea Global multi-utility project.

About the projects: The USD 1.5 bn Red Sea Global project will have a 340 MW solar plant with 1.2 GWh of battery storage, a 32.5k cbm per day desalinated station, a 18.3k cbm per day wastewater treatment plant, a 11.8k tons per year municipal solid waste processing plant, and district cooling with a capacity of 32.5k refrigerator tons (RT). The USD 924 mn Sudair solar plant is one of the largest single-contracted solar PV plants globally and the largest of its kind in Saudi. The USD 105 mn Layla project located in Riyadh is 40% owned by Acwa who is also developing the USD 450 mn Ar Rass solar station with the PIF-backed Badeel.

The company is doing more: The company added 10.5 GW of renewable power and 400k cbm per day of water to its portfolio through new agreements, the report added. Additionally, nearly 1.5 GW of power and 76k cbm per day of desalination capacity reached initial or commercial operations last year.

#2- Egypt mulls more green bonds: Egypt’s Finance Ministry is considering issuing EGP-denominated green bonds and sukuk in the local market to address the budget deficit, Asharq Business reports, citing comments made by Finance Minister Ahmed Kouchouk at a press conference yesterday. No further details were disclosed regarding why the ministry is resorting to local markets instead of international ones. Kouchouk‘s comments come days after the European Bank for Reconstruction and Development SEMED managing director Heike Harmgart signaled Egyptian local banks are gearing up to issue green bonds between this month and September.

It’s been a hot topic for some time: The Egyptian government was reportedly considering issuing green bonds worth USD 700 mn this year by an Electricity Ministry-affiliated body. The government was planning to bring in USD 3-5 bn from sovereign green issuances over the next five years at the time.

Not Egypt’s first: In 2020, Egypt’s maiden green bond issuance brought in USD 750 mn and was almost 5x oversubscribed, attracting some USD 3.7 bn worth of orders for the bonds, pointing to growing appetites for climate-friendly securities worldwide. Local banks in Egypt are also gearing up to issue green bonds between this month and September.

#3- Chinese battery manufacturers are feeling the crunch: Firms operating in China’s battery industry are still struggling to maintain their market shares on the back of overcapacity, low demand, and decreased prices which are expected to stay down throughout the year, Bloomberg reported, citing a report by BloombergNEF. Smaller producers are at risk of having their plants downsized, delayed or canceled while only two producers — Contemporary Amperex Technology and BYD — make up over 50% of the market. Prices are expected to stay low throughout the rest of the year until the industry sheds less established manufacturers whose profit margins are dwindling.

Battery makers are relying on utility scale energy storage to stay afloat: Battery manufacturers in China have turned to the energy storage market — which has maintained more resilient demand compared to EVs — to try and secure their shares in the sector. However this approach isn’t sustainable, BNEF says, projecting that the energy storage market’s growth will be unable to offset the EV slowdown within the next three to five years. The EV industry is set to reach overcapacity of six times later this year, only dropping at the end of the decade to four and a half times if no new projects are announced.

WORTH READING-

#1- Insetting could minimize economic loss for climate-sensitive businesses: Insetting — investing in nature-positive solutions to decarbonize your own supply chain — could help firms reduce nature-related risks predicted to cost them bns, according to Reuters. Given that 52% of global GDP comes from industries reliant on nature, several big conglomerates including Nestle are looking into insetting as an alternative to offsetting, focusing on decarbonizing their own operations through different initiatives such as reforestation.

SOUNDSMART- Insetting vs. Offsetting: Insetting requires a company to tackle their emissions only through their own activities, while offsetting on the other hand involves a company purchasing carbon credits or outsourcing the climate initiatives to bring them to a neutral status, the World Economic Forum explains. Offsetting as a practice has been under scrutiny for some time as uncertainty remains on whether or not the Science Based Targets initiative will accept it as a contribution to meeting net zero targets. As a result of increased doubt around the authenticity of the carbon market, insetting has been rising in popularity in the corporate world.

Nature and business go hand in hand: Despite climate impact reporting becoming common-place amongst businesses, nearly 70% of companies said they do not measure the impact of their value chains on biodiversity. The reason for this is that it is difficult to assess and quantify a company’s impact across its value chain and even more difficult to understand the complexity of ecosystems which is needed to assess impact.

But it’s not that simple: What counts as insetting is still vague, and lacks quantification standards, Reuters writes. While different climate regulatory bodies — such as the GHG Protocol, Gold Standard, and Verra — are working on their own insetting frameworks, a lack of standardization will lead to contradictory results and opinions.Additionally, many companies do not possess the ability to thoroughly trace their value chains, or have their value chains overlap which other stakeholders, which raises the question of who will benefit from insetting.

#2- Big Oil is not happy with the IEA’s anti-fossil fuel stance: Opec is increasingly butting heads with the International Energy Agency (IEA) in response to recently appointed IEA head Faith Birol pushing for a faster transition away from fossil fuels, the Financial Times wrote in a deep dive on Birol. Calling the IEA a “progressive echo chamber,” energy policy maker at the America First Policy Institute Carla Sands and her colleagues believe the organization is no longer neutral. FT expands on how the IEA and Opec were once aligned with their energy forecasts, but have since entered strong opposition over disagreement on when or if the world will hit peak oil demand, and whether the energy transition will destabilize energy security.

DANGER ZONE-

Offsets market enters controversy again as one third of credits fail approvals: 236 mn carbon credits (32% of the market) failed to meet the Integrity Council for the Voluntary Carbon Markets (ICVCM) requirements to qualify for a Core Carbon Principles (CCP) label, striking the already contracting market with more uncertainty, Bloomberg reported. Only 27 mn credits (3.6% of the market) have been approved for the CCP label. The ICVCM says current offsetting structures do not properly assess whether or not the carbon credits revenues are effective in incentivizing the projects.

REMEMBER- The carbon credits market has never been void of criticism: The Science-Based Targets initiative (SBTi) — the world’s leading arbitrar on corporate net-zero targets — recently called carbon credits largely “ineffective.” SBTi's current policy allows carbon offsets only after companies have exhausted other emission reduction efforts, focusing primarily on direct emission cuts. The decision came after CEO Luiz Amaral was asked to step down after receiving backlash for loosening the guidelines on carbon offsets. Last month, over 80 climate nonprofits came together to warn against the use of carbon credits as a tool to offset emissions.

THE SCORECARD-

KSA recycles 100k electronic devices as part of e-waste reduction strategy: In collaboration with the International Telecommunication Union (ITU), Saudi Arabia has recycled over 100k electronic devices as part of its digital sustainability strategy, according to a report (pdf) by the Saudi Communications, Space and Technology Commission. The strategy includes e-waste reduction in three countries and enhancing the circular digital economy as part of the Green Digital Action initiative launched at COP 28 with the ITU and 40 partners.

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