Renewable Energy Market in Growth Mode

A consulting firm says the market for renewable energy around the world will grow at 12 percent a year for the next two decades.

NEW YORK, New York 2002-02-21 [] The compound annual growth rate of 12 percent for revenues will be complemented by annual growth of 13 percent in installed capacity between 2001 and 2020, according to Frost & Sullivan in its analysis of renewable energy markets in Europe. “Although unlikely to supersede conventional generation technologies, renewable energy sources are set for a greater role on the global energy supply stage during this century,” it explains. “Governmental encouragement for greater investment in renewables and the growing recognition of the potential contribution of power generated from clean sources will give the market for alternative generation a much-needed fillip.” Installed capacity of renewables in member nations of the European Union will exceed 109 GW by 2010, excluding large hydroelectric facilities. The growth will be due to government incentives and subsidies for green energy, the introduction of green certificates and green tariffs, and the decline in installation and generation costs, it notes. “The European renewable energy industry is poised for robust growth, albeit showing significant variations in performance. Comprising wind power, solar photovoltaics, biomass power, small hydropower and geothermal power, the overall renewables market amassed $4.6 billion in 2001 based on the installation of all new renewable energy equipment in Europe,” says company analyst Harald Thaler. Another $0.7 billion will be invested in solar thermal installations, where growth trends have been high in past years and will continue into the long term, although at lower rates than expected. The EU wants to obtain 12 percent of its energy from renewables by 2010, with 22 percent of electricity to come from renewable sources by 2020. Each member country has implemented policies and incentives to promote renewables and to complement EU programs, and the Commission may introduce binding targets if national goals are identified as contrary to EU objectives. While all green generation technologies will benefit from mandatory thresholds, the “relatively mature” technology of wind will benefit the most from declining installation and generation costs. “A number of different support mechanisms and funding programs will continue to encourage market penetration of wind power technology over the forecast period,” says Thaler. “Direct support for investment has been used to create markets for wind energy and develop a new manufacturing industry, while support for the price of electricity delivered to the public grid has been employed to stimulate markets in a number of key countries, including Germany, Denmark and Spain.” The wind power segment is expected to outperform the White Paper target by 30 GW, according to study co-author Ian French. The EU White Paper predicted that biomass would contribute 75 percent of the total increase in production, from 44.8 Mtoe in 1995 to 130 Mtoe in 2010, but he says biomass is expected to fall short of those “ambitious” targets, with small hydro capacity deviating the least from the forecasts. Installed capacity growth in biomass peaked at 43.3 percent last year, reaching revenues of $561 million for installations greater than 1 MW capacity. Growth will decline as support schemes are curtailed and developers deal with complex green certificates trading mechanisms. The Frost & Sullivan report forecasts installed capacity levels of biomass plants to reach 61.5 GW by 2020. The EU White Paper sets a target of 23.5 percent of electricity to be generated from renewables by 2010, which would be total installed capacity of 40 GW. “In light of recent developments, the EU’s forecasts are clearly too conservative,” says Thaler. “Our own calculations, forecasts and estimates project an installed capacity of 62.9 GW in 2010 and 144.9 GW in 2020.” Wind power “cannot yet compete with conventional thermal generation as a result of the failure to include the true environmental costs of thermal and nuclear generation in its pricing,” and the New York company predicts that prices will start to reflect external costs only partially toward the end of the forecast period. The study emphasizes that wind has the most optimistic near-term future, although the solar PV industry will exhibit the fastest growth over the next two decades, with manufacturers investing heavily in new production technologies. “The solar thermal market is also promising, with many companies having entered it over the past few years and more expected to follow in the future,” adds French. Small hydro is undergoing a period of resurgence but, since it is a mature technology, developments will be slower than in the other market segments, explains Thaler. The geothermal market, “while remaining small, offers significant opportunities for new entrants, particularly in the lucrative refurbishment arena.” “All of these renewables technologies must continue to compete with the relatively low cost of conventional fossil fuel-based generation,” concludes the report. “Increasing support through incentives and the establishment of obligatory renewables quotas in many countries, however, combined with rapidly declining installation costs, will ensure that renewables gradually become an established part of many countries’ power generation portfolios.” The report costs £5,500.
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