Global Renewable Energy Update
By Jennifer Bieksha, Bishop & Associates Inc.

If there is a positive that has emerged from the catastrophic BP oil leak in the Gulf region, it is an intensified focus on clean and renewable energy resources. Many of the trends in renewable energy show its increasing significance in comparison to conventional energy sources. By 2010, renewable energy resources encompassed fully one quarter of global power capacity from all energy sources and delivered 18 percent of global electricity supply in 2009. More than $150 billion was invested in new renewable energy capacity and manufacturing plants, up from just $30 billion in 2004.

Collectively, developing countries have more than half of global renewable power capacity. China now leads in several indicators of market growth in this area. India is fifth worldwide in total existing wind power capacity and is rapidly expanding many forms of rural renewable, including solar PV. Developing countries now make up over half of all countries with policy targets (45 out of 85 countries) and also make up half of all countries with some type of renewable energy promotion policy.

Renewable energy has an important role in providing modern energy access to the billions of people in developing countries that continue to depend on more traditional sources of energy. More than 1.5 billion people worldwide still lack access to electricity, and more than 2.6 billion rely on wood, straw, charcoal, or dung for cooking. Renewable energy is a key factor in the modernization of billions of households and industries.

Manufacturing leadership is shifting from Europe to Asia as countries such as China, India, and South Korea continue to increase their commitments to renewable energy. In 2009, China produced 40 percent of the world’s solar PV supply, 30 percent of the world’s wind turbines, and 77 percent of the world’s solar hot water collectors. It is expected that the region’s commitment to renewable energy will almost certainly drive down the price of many renewable energy devices in the coming years.

Total new investment in sustainable energy in 2009 was $162 billion, down from $173 billion in 2008. The seven percent fall reflected the impact of the recession on investment, particularly in Europe and North America where renewable energy projects and companies found it harder to access financing than in developing countries. Investment in renewable energy assets was $29.5 billion in the first quarter of 2010, 63 percent above the same period of 2009. It was up from $26 billion in the fourth quarter of 2009, a strong result given the continuing uncertainties in the world economy and the financial markets.

However, while investments in renewable energy decreased as a result of the economic crisis, costs went down as well, as past investment in these technologies yielded ever improving technologies and as overproduction brought prices down in some areas. It is estimated that costs fell by an average of 10 percent across most sectors, but especially in solar PV, which fell around 50 percent, in part due to significant oversupply in the market. These reductions were offset by higher financing costs. At the same time, the crisis also brought down the costs of oil and gas, making renewables less attractive. As the market continues to mature, we foresee considerable consolidation, with the strongest players consuming smaller competitors in order to compete in a commoditized environment.

Continued progress in the face of a steep global recession suggests that renewable energy now has tremendous forward momentum. Most of the large fiscal stimulus packages launched since late 2008 to combat the global recession have included significant funding for renewable energy. It is too early to draw conclusions on how the renewable energy sector has survived the financial crisis and economic recession; however, indications are that long-term prospects for renewables are good.

Solar Energy Shines in Europe
After a slow start in 2009, the solar market began to pick up pace in the second quarter. But the real boom happened in the last quarter, when in Germany alone, 1.46 GW of new capacity was added. With a cumulative installation of 16 GW, the European Union is leading in PV installations, with a little more than 70 percent of the total worldwide 22 GW of solar PV electricity generation capacity at the end of 2009.

In spite of the difficult financial and economical conditions over the past year, the global solar photovoltaic electricity (PV) market achieved an additional increase in installed capacity of about 7.2 GW in 2009, reaching a total capacity of over 22 GW worldwide. This progression in 2009 is mainly due to the development of the German market, which almost doubled in one year from 1.8 GW in 2008 to 3.8 GW installed in 2009, representing more than 52 percent of the global PV market. The emergence of Italy as a major market for PV, combined with the ramp-up of France and the growth of the Czech Republic and Belgium, compensated for the slowdown of the Spanish market.

Europe is leading the way with almost 16 GW of installed capacity in 2009, representing about 70 percent of the world’s cumulative PV power installed at the end of 2009, while Japan (2.6 GW) and the U.S. (1.6 GW) are following behind. China appears as a new player in 2009 with about 160 MW installed, and India, with around 30 MW. In 2010, global cumulative installed PV capacity is expected to grow by at least 40 percent. Germany will likely remain the largest market in 2010, while new markets, in particular Southern Europe, Asia, and the U.S., will grow significantly.

Prices for PV Modules Deteriorate
Today, global manufacturing capacity greatly exceeds global demand. With an estimated total of 16.1 GW of module manufacturing capacity online by the end of 2010, the global PV market is no longer constrained by supply. For a second year, PV modules experienced a major price decline. Prices have fallen to $1.85-$2.25 per watt, from $3.50-$4 per watt in mid-2008, a drop of over 40 percent. With module prices accounting for up to half of the installed cost of a PV system, these prices are putting downward pressure on system prices. The price decline resulted in a purchasing lag: as prices continued to drop, many buyers waited until late in the year to place orders. Many firms were caught with high-priced contracts for material supplies and found it difficult to reduce costs.

The price drop, along with other internal financial and policy drivers, is causing some countries to reduce national incentive programs. Germany plans to reduce feed-in tariffs by 11 to 16 percent at the beginning of July 2010. This move is anticipated to further intensify the demand for less expensive PV in the world’s largest solar market. Despite this impressive rate of growth, the past two years have witnessed a fundamental and difficult market shift for manufacturers. The combination of a rapid capacity build-out and the financial crisis of 2008 and early 2009 shifted the market power downstream into the hands of project developers and financiers.

The industry is operating at very low profitability, all the way from the manufacturer to the installer. To retain competitiveness, companies have increased efficiency, reduced operating costs, and increased capacity utilization at factories. With these challenging market conditions and price declines, solar industry acquisitions are on the rise. We can expect to see more consolidation across the value chain and increased commoditization of solar technology.

PV Supply Chain
Wafer-based silicon solar cells are still the main technology for solar modules and had around 80 percent market share in 2009. Polycrystalline solar cells continue to dominate the market (45 to 50 percent). There are now more than 70 producers of polysilicon for the semiconductor and photovoltaic industry. The massive production expansions, as well as the difficult economic situation, led to price decreases throughout 2009. Prices are expected to continue to drop over the next three years, but at a much slower rate, leveling in 2012.

Thin film’s share of the global market increased from 14 percent in 2008 to 19 percent in 2009 for cells, and from 16 to 22 percent for modules. Of the roughly 150 thin-film manufacturing firms that existed in 2008, only about half were estimated to be active by early 2010, and only a handful continue to produce at full capacity. First Solar led the industry, becoming the first PV manufacturer to produce more than 1 GW in a single year. The majority of thin-film firms have purchased their production lines from market leaders Applied Materials and Oerlikon Solar. However, Applied Materials has just announced that they will be discontinuing manufacturing of thin film, planning to put a greater focus on opportunities in crystalline silicon (c-Si).

The top 15 solar cell manufacturers produced 65 percent of the 10.7 GW of cells manufactured in 2009. Firms in mainland China and Taiwan produced 49 percent of the global total, followed by Europe (18 percent), Japan (14 percent), and the U.S. (6 percent).

Another factor behind the signs of recovery is China. The Chinese economy suffered badly in the recession, and to get it moving again, China committed the equivalent of three percent of its gross domestic product to stimulus spending. The government’s many policies to promote renewable energy have made financing readily available. China also benefits from lower-cost manufacturing. The five largest Chinese module manufacturers (Suntech, Trina, Yingli, Canadian Solar, and Solarfun), all suppliers of crystalline technology, continued to increase their command of the market, and their combined share of global shipments reached 28 percent in the first quarter.

India is expected to grow significantly in the next five years, with an impressive amount of PV projects in the pipeline. Canada and Australia showed significant market development in 2009, and are expected to open the way to the development of new markets. Brazil, Mexico, Morocco, and South Africa are also seen as promising countries.

Concentrating Photovoltaics (CPV)
CPV is an emerging market, with approximately 17 MW cumulative installed capacity at the end of 2008. The market share of CPV is still small, but an increasing number of companies are focusing on CPV. Market estimates for 2009 are in the 20 to 30 MW range, and about 100 MW are expected for 2010.

Concentrating Solar Power (CSP)
CSP manufacturers and developers focused primarily on opportunities in the U.S. and Spain in 2009. As of early 2010, global CSP plants neared 1 GW capacity. Projects now in development or under construction in more than a dozen countries (including China, India, Morocco, Spain, and the U.S.) are expected to total 15 GW. In the U.S. market, in particular, renewable portfolio standard (RPS) requirements for utilities have spurred new project development opportunities for industry firms and utilities.

Unlike other solar applications, the CSP supply chain is not limited by raw materials because the majority of required materials are glass, steel/aluminum, and concrete. Parabolic troughs are installed in 50 percent of planned installations, power towers in 30 percent, and dish/engines in 20 percent, representing most of the remaining projects in the pipeline. Leading players in CSP include Brightsource, eSolar, Siemens, Schott, SolarMillenium, Abengoa Solar, Nextera Energy, Infinity, Tessera, and Acciona.

Wind Energy Continues Strong
Despite the global economic crisis, new wind power capacity installations in 2009 reached a record high of 38 GW. This represented a 41 percent increase over 2008, bringing the global total to 159 GW. The continued growth and expansion of the wind power industry, in the face of a global recession and a financial crisis, is a testament to the inherent attractiveness of the technology. The drivers for wind power development still hold, and there is a need around the world for power generation that is clean, reliable, and quick to install.

Although the traditional markets of the U.S. and Europe held up well, it was the 100 percent growth in China that really led the way to a successful 2009. Despite last year’s record growth, the ongoing financial crisis may still have an adverse effect on installation figures. Since there is a delay between ordering turbines, receiving them, and a wind farm becoming operational, the impact will be felt more this year and in 2011.

Expectations are that global annual installed capacity will still show a small growth this year, and then continue to grow strongly again after that. A leading consultant in the wind industry, BTM Consult ApS, predicts that the average growth rate of annual installation capacity from 2009 to 2014 will be 13.5 percent, resulting in a total global capacity of 447 GW by 2014. A major driving force for the wind power market throughout this period will be strong growth across Asia, especially in China.

Ten years ago none of the traditional manufacturers of energy-generating equipment were active in the wind energy market. The industry is in constant development, where mergers and acquisitions form part of the change. As more companies enter the global wind farm market, wind turbine manufacturers are likely to face increased competition, especially from Asia. It is inevitable that wind turbine and component manufacturers will notice a shift to domestic suppliers. The combined market share in China for GE, Vestas, and Siemens fell to 14 percent last year; a considerable shift from 71 percent in 2005. Sales in China are being eroded by local companies, such as Sinovel and Goldwind.

Wind Market
The general trend shows that the wind energy sector is broadening its market base, and more and more countries are increasing the installation of wind energy capacities. In 2009, a total of 82 countries used wind energy on a commercial basis, and 49 of them increased their installations. The European market accounted for about 27 percent of the total new capacity, a significant percentage decrease from the 75 percent in 2004. In 2009, 454 MW of offshore wind capacity were added, increasing the total installed capacity to almost 2 GW, or 1.2 percent of the total wind capacity worldwide.

Cumulative Wind Market Forecast By Region
2009 - 2014

Three regions will continue to drive the expansion of wind energy capacity: Asia, North America, and Europe. Asia will remain the fastest-growing market in the world, driven primarily by China, which will continue to upscale its wind capacity and hold its position as the world’s largest annual market. Sustained growth is also expected in India, which will increase its capacity steadily by 2 GW every year, and be complemented by growth in other Asian markets, including Japan, Taiwan, South Korea, and the Philippines.

For Asia as a whole, the annual market is expected to nearly double in the next five years, reaching 27 GW by 2014, which translates into 109 GW of new wind capacity to be installed in the region in five years, far more than in any other region of the world. In 2014, Asia is expected to overtake Europe as the region with the largest total installed capacity, with a cumulative 148.8 GW of wind generation.

Top 10 Wind Turbine Manufacturers
2009

In 2009, European and Chinese firms dominated the wind turbine manufacturing sector. Among individual companies, Vestas (Denmark) retained its top spot, GE Wind (U.S.) remained in second place, and Suzlon (India) also ranked among the top 10 global manufacturers. Three of the top 10 wind turbine manufacturers are Chinese, and there are now more than 70 companies involved in wind equipment manufacturing.

REGIONAL DISTRIBUTION
Europe continues to lead the world’s largest market for wind energy development. Germany leads Europe in existing capacity, adding 1.9 GW, and ending the year with a total installed capacity just under 25.8 GW. However, Spain topped the European market for new installations, adding 2.5 GW. While Germany and Spain are expected to remain the leading European markets, the trend towards a larger number of strong markets will become more pronounced as Italy, France, the U.K., and Portugal continue expanding their wind capacity.

In North America, more wind generation capacity was installed in 2009 in the U.S. than in any previous year. The U.S. added over 10 GW of wind power capacity, maintaining its lead in existing capacity with a total of 35 GW. At the end of 2009, 14 U.S. states had more than 1 GW each of installed capacity. Texas remained the leader, with nearly 10 GW of cumulative capacity, enabling the state to reach its 2025 renewable energy target 15 years early. Canada also experienced a record year with 950 MW of new capacity additions, bringing its total up to 3.3 GW.

For the first time, Asia was the world’s largest regional market for wind energy, with 15.4 GW of added capacity. China was the world’s largest market in 2009, more than doubling its capacity from 12.1 GW in 2008 to 25.8 GW, moving past Germany to become the world’s second largest wind power market.

The growing wind power market in China has encouraged domestic production of wind turbines and components, and the Chinese manufacturing industry is becoming increasingly mature, stretching over the whole supply chain. The supply is starting to not only satisfy domestic demand, but also meet international needs, especially for components. Two Chinese companies, Sinovel and Goldwind, are now among the world’s top five turbine manufacturers. The vision of the Chinese wind turbine manufacturers is to establish a strong international manufacturing presence in the big markets, and offer wind farm operation and financing. This strategy is backed by the Chinese government, which sees wind as a critical element to accelerate the maturing of the domestic industry and bring down the costs for wind electricity in China.

The second largest Asian market remained India, with a 14 percent growth rate, reaching a total capacity of 11 GW. Other Asian countries with new capacity additions in 2009 include Japan, South Korea, and Taiwan. The Pacific region, led by Australia and New Zealand, is forecast to continue to grow at a steady pace to reach a total installed capacity up to 6.4 GW by the end of 2014. Activity levels remained low in the remaining regions of the world.

OFFSHORE WIND TURBINES
Offshore wind capacity continued to grow in 2009. By the end of the year, sea-based wind farms could be found in 12 countries, 10 of them in Europe, with minor installations in China and Japan. Total installed capacity amounted to almost 2 GW, 1.2 percent of the total wind capacity worldwide. The growth rate of offshore wind is 30 percent, slightly below the general growth rate of wind power.

China installed the first major offshore wind project outside of Europe in 2009, adding 63 MW by year-end for a project that reached 102 MW upon completion in early 2010. Japan added 1 MW in 2009. Although the U.S. began no new offshore wind projects during 2009, more than 10 were at various stages of development, and the 420 MW Cape Wind project off the Massachusetts coast won final approval in April 2010.

Connecting offshore wind farms to national electricity grids continues to present a challenge. In Europe, a dedicated offshore electricity system is being planned to provide grid access for the more remote offshore wind farms. Not only will it provide grid access to offshore wind farms, but it will also improve the ability to trade electricity within Europe, thereby contributing dramatically to Europe’s energy security. Various models for a European “super grid” have been proposed, and the European Commission and national governments agreed in 2009 to provide political direction and a strategic plan for an offshore super grid.

Director, Renewable Energy, Medical, and Test, Measurement, and Instrumentation, Bishop & Associates Inc.
Jenny Bieksha joined Bishop & Associates in 2008 as its market segment director for the renewable energy, and the test, measurement, and instrumentation markets. She is currently a management consultant specializing in strategic business planning, with an emphasis on the development of program, market, and product plans. Bieksha has more than 20 years of experience in the electronics industry, with a background in market management, business development, channel sales, product management, and operations for ITT Corporation, Delphi Connection Systems, and Hughes Aircraft Company.

Bieksha has a bachelor of science degree in marketing from the University of Wyoming, and has received her certificate as a project management professional.