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Exclusive: 2012 predictions from renewables industry leaders
Recharge asked senior officials from across the industry to predict the changes and challenges that lie ahead in 2012. Here is what they said...
Jorge Calvet, Gamesa chairman and chief executive
"Emerging nations will remain the main drivers of growth, with India and Latin America posting the fastest rates of expansion.
"Meanwhile, regulatory uncertainty and policy changes in countries such as the US, Spain and China will continue to influence demand trends, which are likely to remain highly volatile — although the US may be buoyed ahead of the expiration of production tax credits (PTCs) at the end of the year.
"Future regulatory regimes will prioritise production incentives and renewables certificates. This will shift demand from private customers and industrial groups to independent power producers and power companies.
"Wind energy must continue to improve its cost of energy to compete against conventional sources. We can achieve this by investing in innovation, launching products better adapted to a variety of markets and customers, and boosting device availability through more sophisticated operations and maintenance (O&M) tools and programmes.
"In an environment of heavy competitive pressure, companies must become more efficient. Optimising costs and the supply chain, and securing a presence that spans the value chain from development to O&M services will become — in fact, already are — key priorities.
"The current environment of debt and difficult access to credit is likely to persist in 2012. These conditions will determine the expansion plans and debt strategy of many of our largest customers.
"Ensuring a healthy balance sheet will also be a priority for the manufacturing sector, but will be difficult to achieve, as companies must continue to invest in technological and industrial plans, particularly as they develop a segment of their business — offshore — that is set to revolutionise the wind-energy market."
Tulsi Tanti, Suzlon chairman and managing director
"The wind industry is looking towards a sustainable phase of growth. Three key trends will underpin this phase.
"First, wind energy has become more price-competitive and is meeting grid parity in several markets. For example, onshore wind is now less expensive than natural gas in Brazil, less expensive than power generated from imported coal in India, and is highly competitive with the main fuel sources in Europe. Wind will continue this journey of becoming more competitive.
"Second, we have witnessed a shift in the centre of gravity of the wind industry towards emerging markets. More and more countries are incorporating policies that encourage greater deployment of low-carbon technologies. While the main mature markets remain committed, these new markets will help the industry to continue on an accelerated growth path.
"Third, we will see continued technological advancements that will make it easier to harness power in low-wind sites and help integration with the main grid."
Anders Eldrup, Dong Energy chief executive
"There will be larger and more advanced turbines matured and tested in 2012, and larger vessels with a much greater tonnage built to speed up the installation process. For example, A2SEA’s new vessel Sea Installer, which is under construction, will be purpose-built and able to carry eight to ten turbines at a time.
"The zones that will be opened for future project development are also expected to span a much greater area than we see today, they will be further from shore, and at much deeper sea depth.
"An increased demand for lower energy prices will force industry to step up the optimisation of all processes within construction of offshore wind power. Dong Energy is committed to further industrialise and optimise all processes within deployment and operation of offshore wind power. Faster, and therefore less costly, installation can prove a vital tool in the industrialisation of offshore wind power, along with a developed project pipeline, frame-work agreements with suppliers and purpose-built harbour facilities capable of handling the newly designed and larger vessels.
"The expansion of offshore wind throughout Europe will require novel ways to obtain the massive amount of financing needed. Industry expectations are that investments in offshore wind alone will increase by €100bn-120bn ($131bn-157bn) by 2020.
"Recently, the UK welcomed institutional investors to invest in the country’s new infrastructure. This is a trend I expect to unfold in other EU nations. We were the first European energy company to attract significant pension-fund investments in our wind projects. Today, we have joint ventures with four larger institutional investors (pension and capital funds, and trading houses) backing our offshore wind projects. This financing model could prove vital for Europe’s transition to a decarbonised future."
Steve Sawyer, chief executive of the Global Wind Energy Council
"Downward price pressure on wind turbines will continue and with the rise in price of just about everything else, wind power will be directly cost-competitive with new-build for any other technology in an increasing number of markets.
"This will occur despite the absence of a global price on carbon, despite conventional technologies not having to price their water consumption, water pollution, air pollution and land degradation; and despite conventional technologies continuing to receive hundreds of billions in government subsidies.
"Latin America and sub-Saharan Africa will emerge as the “other” serious new markets, with record installations in Brazil and Mexico. Brazil’s manufacturing sector will boom, resulting in surplus capacity driving prices even lower, and spurring the development of satellite markets in the region.
"South Africa will begin to emerge as the hub of a spate of new projects under development in eight or ten countries in the region; and we should have an announcement of at least one major manufacturer opening a facility in the country.
"The Chinese market will mature, emphasising quality over quantity, as wind begins to make up a measurable share of China’s electricity mix; and domestic manufacturers will emphasise their low cost of electricity as opposed to merely their low capital costs.
"The cost of coal-fired electricity will continue to rise, and wind-powered electricity in the best wind zones will become directly competitive with coal-fired electricity.
"The early forays of China’s major turbine manufacturers into markets in North and South America, India and Africa will show signs of turning into significant (but not dominant) market share.
Vic Abate, GE vice-president of renewable energy
"Industry competitiveness is accelerating, spurred by advanced technology. Intense competition is driving our industry to innovate faster, constantly pushing performance, reliability and efficiency thresholds. Ultimately, the most cost-effective projects with the best technology will win.
"Renewables will go mainstream. Wind and solar will soon generate more than 5% of the world’s electricity — the growth is happening now and it’s happening globally. To play, you must have scale, resources and expertise.
"It will be survival of the fittest. Renewable energy isn’t a fad, it’s a global market, with global suppliers and global demand. Only the best are going to win — you must keep innovating and you must be profitable to stay in the game.
Ole Enger, chief executive of REC
"We expect consolidation in the solar industry to continue into 2012 as more and more players are forced out of business. Integrated players such as REC, with strong operations throughout the value chain, are well positioned to weather this.
"Growth will continue to come more and more from Asia. China and India and many others in the sunbelt can benefit from solar, given the demand for energy and the overall growth in the region.
"As the cost of solar continues to fall and the real cost of competing energy sources is better understood, we expect interest in solar to increase. "
Mike Garland, Pattern Energy chief executive
"For 2012, the biggest issue facing the industry is the expiry of the PTC and investment tax credit (ITC) at the end of the year.
"This creates a logjam of projects trying to get permitted and built by the end of 2012.
"Without passage of a PTC/ITC extension by Congress, US manufacturers and component suppliers will be facing lay-offs and shutdowns by the middle of 2012 (after the majority of the equipment has been manufactured).
"Because there is extreme uncertainty as to the PTC/ITC extension, little investment is being made in new development, and utilities are delaying any consideration of new power-purchase agreements. You are already seeing more than 100 development jobs lost in the industry and hundreds of millions of dollars not being spent in the US — and being redirected to other countries with more stable energy policies.
"It will take a significant effort to restart development, manufacturing and contracting efforts. This will be particularly hard if Congress acts late and only provides a short-term extension."
Tao Gang, Sinovel senior vice-president and chief financial officer
The Chinese wind industry will participate more actively in the international market. The advantages of the industry will be better showcased to the world, and more market share will be gained.
With relevant policies, rules and regulations more soundly made, the offshore wind industry in China will experience prosperous and steady development, from which the whole supply chain will benefit.
The year will be a turning point. With policies fully implemented, the wind industry will be restructured and integrated for a period of sustainable development.
Andrew Beebe, Suntech chief commercial officer
"As cooler heads prevail, the global solar industry will reunite to oppose protectionism and trade barriers that would tax our incredible progress. The industry will refocus on our paramount goal: making solar affordable for everyone, everywhere.
"Fierce competition will continue into 2012, with market leaders separating from the pack, as customers demand larger volumes of high-quality products from bankable suppliers. Not everyone will survive, but the industry and jobs will grow and consumers will benefit.
"Amid fierce global competition, solar’s value proposition will unlock gigawatts of new demand, particularly in new markets. Global activity will increasingly mirror global demographics and sunlight rather than traditional centres of wealth. This will start to bring supply and demand back into balance."
Eduardo Lopes, Wobben Windpower commercial director
Brazil’s wind market should continue growing by about 2GW a year, and prices should stabilise at levels that are a little more conservative and coherent with market realities.
Projects that sold power at the 2009 and 2010 tenders should start coming on line, consolidating the market and the contracting rules of the wind sector.
Wu Gang, Goldwind chief executive
"China’s wind industry will enter a steady period, with the rate of growth slowing to 15-20% annually, compared to the past five years of an average of almost 100% annually. The focus is shifting from growth rate to quality, from manufacturing to innovation and from domestic to international markets.
"The Chinese wind industry is still in its infancy. We see a big gap between Chinese companies and their peers in Europe and North America in aspects such as strategic planning, management, operations, cost control and quality assurance.
"These shortcomings, however, have been somewhat hidden by the recent rapid growth. Chinese companies need to catch up to make themselves not only big enough, but also strong enough.
"Four Chinese wind turbine makers ranked in the world’s top ten last year. However, the majority of their market shares come from China. Going international means Chinese companies will grow bigger and stronger by leveraging and consolidating resources globally.
"Most Chinese developers and manufacturers are still keen on low initial price when they buy or sell wind turbines, while ignoring the total costs and benefits throughout the life cycle of the product. This, in many cases, will lead to poor quality and low power-generation efficiency."
Adam Browning, Vote Solar Initiative executive director and co-founder
"The big question is what impact will SolarWorld’s petition to the US International Trade Commission — and China’s potential response — have on the cost of modules in the US, on America’s solar exports, on the gigawatts of contracted but not yet built solar projects in the pipeline, on residential installers in states with diminishing rebates and on incentive programmes globally.
"Political animals such as Grover Norquist and Karl Rove are going to attack renewables as a proxy for Barack Obama’s administration during the 2012 election year. That’s the bad news. The good news is that solar enjoys bipartisan support from an overwhelming majority of Americans, while mainstream energy companies, such as GE and NRG, are going all in on solar. Even against an enemy that has its own TV network (Fox News), this is a fight we can win. We need to go on the offensive to make the case... and make it a reality.
"Utility-scale wholesale power generation has soared, as has customer self-generation. But just as solar is achieving price points at or below the cost of buying energy at retail rates, some utilities are fighting back. San Diego Gas & Electric is seeking to impose grid charges just for solar customers.
"Other utilities are organising an attack on net metering (and their feed-in-tariff proposals are not any better). The rights of customers to self-generate in the US’s biggest solar market — California — are at stake. This is a battle with huge implications."
Arno Harris, Recurrent Energy chief executive
"Several years from now, we’ll look back on this period as the beginning of the “grid-parity era” for solar power. Declining dependence on subsidies will lead to the mainstreaming of solar and tremendous demand growth.
"However, the Darwinian pressure to cut costs, mobilise capital, shift business models and capture growth will vastly alter the industry landscape.
"Continued investment in silicon refining and module manufacturing has resulted in a significant overcapacity that will persist for the foreseeable future. Strong demand has delayed upstream consolidation, but 2011’s module price collapse will be the trigger that releases the inevitable in 2012.
"Module manufacturers with high cost structures and those without the cash cushion to survive a brutal pricing environment will fail or be subsumed. What will emerge will be a transformed upstream industry led by lean companies that can deliver continued cost reductions via sustainable business models in a grid-parity era.
"This year is unlikely to deliver any further clarity or unity on US energy policy. The logic of election-year politics with a divided Congress will result in continued bipartisan gridlock and polarised grandstanding on energy issues. Hopefully, this will exhaust the parties and set the stage for constructive dialogue after November. Perhaps in 2013, we can begin in earnest to define a vision of America’s energy future that is affordable, reliable, sustainable, secure and clean."
Eric Pyle, New Zealand Wind Energy Association chief executive
"Electricity demand in New Zealand has been reasonably static since 2008. If the global economy really does tank, then demand might start reducing, including in New Zealand.
"If natural-gas prices continue to rise, wind will become increasingly cost-competitive. The long-term cost of electricity from New Zealand’s wind farms is now close to the short-term cost of gas generation.
"A high proportion of New Zealand’s wood exports are logs to China, and processing these logs there requires electricity. China could encourage processing of logs in electricity-rich countries, thus importing “virtual electricity”. In turn, this could drive up electricity demand in New Zealand, a significant portion of which could be met by wind."
Alla Weinstein, Principle Power president and chief executive
"We should see more offshore wind activity in the US, including in deep water, and the establishment of turbine fabrication facilities to serve the domestic offshore market.
"Floating offshore wind solutions will attract more attention, as they provide developers with options that were not previously available, providing access to sites that could be developed closer to the demand centres, faster, and possibly with better economics.
"Turbines larger than 5MW specifically designed for the offshore environment will become the primary choice for developers and utilities."
Pedro Pileggi, Renova Energia director of investor relations
"Wind power will increase in the unregulated market and for big consumers. Turbines specific to Brazil will be developed, while Chinese turbines will be made in Brazil."
Compiled by Ben Backwell, with Richard A Kessler, Benjamin Romano, Christiana Sciaudone, Dominique Patton, Darius Snieckus, Karl-Erik Stromsta and Oliver Wagg.
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