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Renewable energy, 2009 and beyond: green shoots of recovery amid turmoil?


By David Jones


December 15, 2009 - After weathering financial storms this year, the renewable energy industry could be poised for a rebound in 2010. New regulatory systems in Australia, China, Japan and perhaps the United States should buttress renewables markets.


Renewable energy, like all electricity supply systems, was pummelled by the global financial crisis that produced major drops in power demand and dried up credit for major construction projects.


Yet as the industry looks ahead to 2010, some sectors look ready to resume their growth of recent years -- though likely at less phenomenal rates -- while others work to establish their presence in global energy markets.


Renewables, like most energy sources, benefit from a variety of government policies.


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Renewable energy, though, is buoyed by specific incentives designed to increase power generation -- primarily feed-in tariffs that provide generators with payments for clean-energy generation or through requirements that retail power suppliers obtain a set percentage of their electricity from renewable resources.


Renewable energy, though, is buoyed by specific incentives designed to increase power generation -- primarily feed-in tariffs that provide generators with payments for clean-energy generation or through requirements that retail power suppliers obtain a set percentage of their electricity from renewable resources.


These policies and other support programs, such as tax breaks, have helped shore up investor confidence in the industry even as bank financing has largely evaporated. Yet major hurdles remain in meeting a range of energy goals while fostering clean power, Ernst & Young partner Ben Warren told Platts.


"How do governments deliver low-carbon energy at an affordable cost, and how do you persuade consumers and energy providers to pay for it?" he asked. "It's where energy security, de-carbonization and economic growth all come together. How do you do them all? It's a real challenge for policy-makers."


In addition, trade policies emerged as a major controversy in renewables policies this year. US Democratic Senator Charles Schumer attacked an effort by a Chinese-US partnership to obtain economic stimulus funding for a Texas wind farm because the turbines would be built in China (the partners later agreed to build a turbine factor in the United States).


In Brazil, the government slapped duties on imports of wind energy equipment to shore up the country's nascent turbine manufacturing sector.


The global financial crisis produced several casualties in the renewable energy field in 2009. Three solar energy companies -- Australia's Solar Systems, Germany's Sunline and Itarion, a joint venture by German company Centrosolar and Portugal's Qimonda -- filed for insolvency or entered into administration.


Spain's decision to cap the amount of solar photovoltaics capacity eligible for government subsidies at 400 MW through 2011 eviscerated the country's thriving PV market.


European solar chip and module manufacturers complained that low labor costs enabled Chinese PV producers like Suntech Power and Yingli Solar to undercut them in international markets, while China's leading PV companies responded that European producers could no longer effectively compete.


Econcern, a Dutch renewables company founded in 1984, also fell apart, jeopardizing the 400-MW Gode Wind 1 offshore wind station in Germany's North Sea that it was developing with wind farm developer Plambeck Neue Energien.


The Netherlands company's corporate operations were later sold in pieces.


Mergers and acquisitions appear likely to continue in 2010, as small companies desperate for finance are scooped up by bigger operators or subsidiaries of larger companies that collapse are sold off piecemeal, as happened with Econcern.


Even companies that remained solvent had difficulty securing financing for projects, particularly large-scale plants like offshore wind farms.


Wind industry deals are tougher to arrange and are taking longer to put together, Warren said, noting that all renewables are competing for the same pool of investor funds.


The trend in larger deals is "to bring in a pre-arranged syndicate. There are signs of recovery there. It'll be interesting to see how offshore wind develops next year, and whether the financing arrives," Warren said. (See table: Key renewable energy trends for 2010).


Other analysts believe that as debt and equity from commercial lenders remain tight, credit agencies and multilateral institutions, such as Germany's KfW IPEX-bank and the European Investment Bank, will be counted in the coming year to fill the gaps.


EIB is currently helping the UK make £1 billion in finance available to wind farm developers and has joined with major European Banks to create the $900 million Marguerite Fund.


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