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SoftBank, Saudi Arabia creating world’s biggest solar power project

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Saudi Arabia and Japanese telecom giant-turned-tech investor SoftBank expanded their partnership this week, announcing the world’s biggest solar power generation project at a press conference in New York.

The project was projected to cost $200 billion through 2030. That’s about how long it’s anticipated it will take to build out all 200 gigawatts of the project.

By comparison, there are roughly 70 gigawatts of solar capacity in operation, under construction or in development in the United States, according to a list of large-scale projects kept by the Solar Energy Industries Association.

The project is so large, it will support the creation of a domestic solar equipment manufacturing industry in the kingdom, said SoftBank CEO Masayoshi Son.

The project remains in the early phases, and it is not yet guaranteed it will be built. Saudi Crown Prince Mohammed bin Salman and Son signed a memorandum of understanding between Saudi Arabia’s Public Investment Fund and the SoftBank Vision Fund on Tuesday evening, which kick starts the process of forming a new power generation company. The intention is to complete due diligence on the project by the end of May.

“This kind of a project would never have been feasible without the big vision we shared with the crown prince,” Son told reporters.

“The kingdom has great sunshine, great size of available land, great engineers, great laborers,” he said. “But most importantly it has the greatest vision.”

Expanding into renewable energy is a key part of Saudi Arabia’s Vision 2030, a plan spearheaded by Prince Mohammed to diversify the nation’s oil-dependent economy.

The 200 gigawatts of capacity announced Tuesday will be spread throughout the kingdom. The first two solar parks will be able to generate 7.2 gigawatts of power and are scheduled to begin construction this year and start generating electricity in 2019.

The cost of the two parks will be about $5 billion, with $1 billion coming from Softbank’s Vision Fund and $4 billion from project financing.

Son said revenues from early stage solar parks will help fund the construction of future projects in the kingdom. Each park will have a 25-year power purchase agreement, a long-term contract to supply electric power to customers, which is common in the solar energy industry.

The first parks will not include battery storage, but the new Saudi electricity generation company will begin adding that feature to solar farms within two to three years, according to Son.

The estimated $200 billion project cost includes building the solar parks, integrating battery technology and constructing a massive new facility that will vertically integrate solar equipment manufacturing, according to Son. The venture also plans to build centers for research and development and education and training, he said.

The growth of the solar industry is expected to create 100,000 jobs and increase Saudi gross domestic product by $12 billion. It is also expected to save the kingdom $40 billion by obviating the need to burn domestically produced oil to generate power.

The announcement happened during the New York leg of Prince Mohammed’s trip across the United States. The 32-year-old king-in-waiting and a Saudi delegation are cementing ties with the Trump administration and lining up American investors as the kingdom embarks upon an ambitious plan to diversify its economy.

Earlier on Tuesday, the Saudi-U.S. CEO Forum gathered American and Saudi business leaders in New York, where the kingdom announced about three dozen memorandums of understanding with U.S. firms, which are often the first step in establishing business ventures.

Saudi Arabia’s Public Investment Fund is the largest investor in Softbank’s $100 billion Vision Fund. The kingdom’s sovereign wealth fund has reportedly committed $45 billion to the massive technology investment vehicle, which counts Uber, Nvidia and WeWork among its largest investments.

The fund, which was at $93 billion, reached its target after raising $7 billion from U.S. corporates and managers of the Vision Fund in the last few months, according to a source familiar with the fund. The fund is now closed.

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Former coal mines could be converted into a geothermal energy facility

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This image, from November 2017, shows derelict buildings at the Chatterley Whitfield Colliery in Staffordshire, England.

Alan Tunnicliffe Photography | Moment | Getty Images

A project aiming to harness geothermal energy from disused, flooded coal mines in the northeast of England took another step forward this week after it was given planning permission for an initial testing phase.

In an announcement Monday, South Tyneside Council said the development would “draw geothermal energy from abandoned flooded mines in the former Hebburn Colliery.” The Hebburn Colliery opened in the late 18th century and shut down in 1932.

The idea is that the project will heat buildings owned by the council, which is working on the project alongside Durham University and the U.K.’s Coal Authority.

The U.K.’s abandoned mines could well prove to be a useful source of geothermal energy — which the U.S. Department of Energy describes as a “vital, clean energy resource” — in the years ahead.

As the Coal Authority notes, “when underground mines are abandoned, the pumps that kept them dry are often switched off and the mines fill with water.”

Geological processes heat the water, it adds, and the temperature stays stable throughout the year.

In Hebburn, two wells are to be drilled to take water from the mines, with tests undertaken to make sure the project is viable.

If all goes to plan, a water source heat pump will eventually be used to “extract the heat from the minewater before it is compressed to a much higher temperature.” Drilling works and well construction are slated to be finished by the fall.

“Work will start on the testing phase of this project without delay,” Tracey Dixon, who is the leader of South Tyneside Council, said in a statement issued Monday.

Dixon added that the project, which will benefit from more than £3.9 million ($5.48 million) in funding via the European Regional Development Fund, was “expected to deliver a reduction of 319 tonnes of carbon emissions a year.”

The U.K. has a long association with coal mining, but the industry’s decline has hit many communities hard and is an emotive subject.

In recent times, plans for a new coal mine in Cumbria, in the northwest of England, have generated a great deal of debate, not least because the U.K. is set to host the COP26 climate change summit later this year. The project’s fate is still to be determined.

The Hebburn Colliery project is one of several in the U.K. looking to introduce new energy technologies to old coal mining sites.

In March, it was announced that a coal mine turned waste depot in the northeast of England would undergo a retrofit utilizing a range of sustainable technologies and design features.

The project to update the Morrison Busty depot in County Durham will center around the construction of a 3 megawatt solar farm that will power the site’s operations.

In addition, electric vehicle charging points will be integrated into the development’s design, while a battery storage system will also be built.

The depot, which is located in the village of Annfield Plain, traces its roots back to the 1920s, when it was known as the Morrison Busty Colliery. The coal mine closed down in 1973.

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EU citizens in the UK are worried about their future, IMA survey shows

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Anti-Brexit protester Steve Bray (L) and a pro-Brexit protester argue as they demonstrate outside the Houses of Parliament in Westminster on January 08, 2019 in London, England.

Jack Taylor | Getty Images News | Getty Images

LONDON — Many EU citizens who are still living in the U.K. after Brexit have said they do not feel treated equally to British citizens and feel worried about their rights, a new survey has found.

A lack of uncertainty about their future status in a post-Brexit U.K. has caused 1 in 10 EU citizens living in Britain to say they are considering leaving the country after the end of June. This is the deadline for EU citizens to apply to remain lawfully living and working in the U.K.

Other findings in the survey of almost 3,000 EU citizens living in the U.K., which was conducted by the Independent Monitoring Authority for the Citizens’ Rights Agreements, an independent organization set up to protect the rights of EU citizens living in the U.K., found that trust in public bodies was low.

One in 4 respondents in the survey said they did not believe that they are currently treated equally to U.K. citizens and nearly 1 in 2 respondents did not have confidence that they will be treated equally in future, according to the research carried out over a six-week period from February to March this year.

‘Hostile environment’

Ahead of the Brexit vote in 2016, so-called “leavers” and “remainers” engaged in often vicious debate over the merits and pitfalls of EU membership.

Critics of the Leave campaign, and resident EU citizens, felt that there was often a xenophobic undertone to some of the arguments put forward by leavers, whereas leavers felt remainers were often too negative about the U.K. and its prospects as a “sovereign” nation.

Were it not for the coronavirus pandemic, the final transition out of the bloc on Jan. 1 2021 and the effects on EU-U.K. trade and politics would likely have been bigger news. Nonetheless, Brexit has left a bitter taste in many people’s mouths and still divides the U.K. down national lines — Scotland and Northern Ireland voted to remain, Wales and England to leave.

Pro-Brexit demonstrators wave Union Jack flags as they protest outside the Houses of Parliament on November 23, 2016 in London, England.

Jay Shaw Baker | NurPhoto | Getty Images

Almost one in 10 respondents also felt more unwelcome in the U.K. post-Brexit, with one saying there was a “hostile attitude from government towards immigrants” and another saying they felt there was a “hostile environment” with “people becoming more intolerant towards EU citizens.”

A spokesperson for the U.K. government didn’t immediately respond when contacted by CNBC.

Another summed up recent tense exchanges between the U.K. and EU since the start of the year, when a post-Brexit transition period ended, noting that “the atmosphere between the UK and the EU is hostile, I’m worried.”

Interestingly, respondents most likely to leave were German, Spanish or French, older males, living in the northeast or southeast of England and those who had lived in the U.K. for five to 10 years. Those most likely to stay were Norwegian, Lithuanian, or Portuguese, younger women, living in Wales or the northeast of England and who had lived in the U.K. for less than a year.

Citizens’ rights

Tensions between the EU and U.K. have been high since the shock June 2016 vote in which a narrow majority, 52%, voted to leave the bloc. Years of painstaking (and painful) negotiations ensued to disentangle the U.K. from the now-27 member economic and political union, and to create a new trading relationship.

Citizens’ rights — both for EU nationals and their families in the U.K. and vice versa — were part of the Withdrawal Agreement struck between the EU and U.K. and essentially these sought to continue any residential and employment rights for each others’ citizens that had been held pre-Brexit.

EU citizens in the U.K. were told they would have to apply to stay as part of the EU Settlement Scheme and, currently, EU citizens have until June 30 2021 to apply for “settled” or “pre-settled” status (the status granted depends on how long the individual has lived in the U.K.); anyone applying must usually have started living in the U.K. by the end of 2020.

When Remainers protested against Brexit: Thousands of protesters gather in London on September 09, 2017 in London, England.

Barcroft Media

Conversely, U.K. citizens in various EU countries have had to apply for new residence permits in their respective adopted countries, with varying deadlines this year.

The IMA’s survey of EU citizens in the U.K. revealed concerns over future citizens’ rights, however, with 30% of respondents not confident their rights will be upheld. One in 25 respondents already believed their rights have been breached. One in 10 respondents said they wouldn’t complain about a breach of their rights, believing that complaining would achieve nothing.

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‘Everything ultimately will settle down’

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A worker on an auto assembly line in Smyrna, Tennessee.

Luke Sharrett/Bloomberg/Getty Images

The concentration of price pressures in a handful of categories means markets shouldn’t yet be worrying about inflation after Wednesday’s U.S. surprise, economists have told CNBC.

The U.S. Consumer Price Index for April rose 4.2% from the same period last year, its sharpest rise since 2008, while the monthly climb in core inflation, which excludes volatile food and energy prices, was the fastest since 1981.

The readings triggered significant sell-offs across global stock markets, as investors feared that the surge in inflation could prompt the Federal Reserve to alter its accommodative monetary policy stance. 

Used car and truck prices, seen as a key inflation indicator, surged 21%, including a 10% increase in April alone. Airlines and shelter also featured heavily due to the sudden upswing in demand as travel restrictions were lifted. 

The automotive industry has been hamstrung this year by a global shortage of semiconductors which has led major carmakers to cut production. Nissan on Thursday became the latest to announce that it would make half a million fewer cars in 2021 due to the shortage. The used car price spike has been attributed to the knock-on effect from this crisis.

“It’s not inflation but it is a legitimate supply problem, and every new car that’s not sold is a used car that’s not created,” said Carl Weinberg, chief economist at High Frequency Economics. 

“At the same time, the rental agencies are jumping to the used car market because they can’t get new cars either, so we have a shift in demand to the right and upward and a shift in supply at the same time to the left and that’s causing the rise in prices,” he added, noting that this did not constitute inflation. 

Weinberg also noted, in line with the position of many Fed officials, that the sudden shift from total shutdowns of the services sector to a more balanced distribution of price pressures across the economy would eventually stabilize inflation. 

“We are seeing transient shocks, bottlenecks along the way as we get back up to speed, and everything ultimately will settle down,” he added. 

Marco Valli, head of macro research and chief European economist at UniCredit, also told CNBC that the Italian lender believes the inflation spike to be temporary, but admitted that Wednesday’s numbers had caused “a bit less confidence” in that projection. 

Noting the concentration of price pressures in categories directly affected by supply problems in the automotive industry or the reopening of the services sector, Valli suggested the Fed would need to see much broader and more sustained inflation. However, he predicted that the currently robust price growth would likely continue for several months.

“The risk has increased, but we also think it is transitory and to understand where this is really going to get concerning for the Fed, you really have to look at the broadness of the categories of price increases that you see,” Valli said. 

Further data from the U.S. Bureau of Labor Statistics on Thursday showed that the Producer Price Index (PPI) spiked 6.2% year-on-year in April, the largest increase since the agency started tracking the data in 2010.

Inflation surge the ‘least bad outcome’ for the Fed 

Fed officials have repeatedly suggested that along with inflation, employment will also have to pick up in a substantial and sustainable fashion before policy changes.  

Weinberg suggested that the employment rate is in fact the priority for the central bank, with a higher-than-desirable inflation rate a price it would be willing to pay. 

“Is the problem inflation, is that the biggest risk right now, or is the problem sustained unemployment, which could force the government into subsidizing people’s incomes for an unaffordable period of time or leading to a crash?” he said, adding that this is the scenario the Fed is most committed to avoiding. 

“So if it is going to take some inflation risk along the way, that may not be the best possible outcome, but it’s certainly the least bad outcome, rather than risking continued runaway unemployment.”

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