"A revolution is underway" in the renewable energy industry, Ernst & Young boldly asserts. According to its latest Renewable energy attractiveness indices, the balance of power is shifting from Western Europe and the U.S., to Eastern Europe, the Middle East, North Africa, South East Asia and Latin America.
The company explains that Western European countries, like Germany and Italy, have been hit by a "perfect storm" of weakened political support, insecure financiers and higher levels of competition from other markets. It adds that, in particular, China, South Korea and Taiwan, are "taking over" strategic manufacturing sectors and increasing their exports, thus leading to "friction" with other, more established markets. Consequently, it says that while developed countries "remain focused on slowing demand and cutting costs", rapid growth markets are displaying a voracious appetite for energy, thus serving to transform the renewable energy industry.
Ernst & Youngs assertions correlate to those cast at the end of 2010, when Ash Sharma, Research Director at IMS Research told pv magazine that the solar industry would begin to diversify on the back of subsidy changes, thus resulting in lots of the smaller markets becoming more important. At the time, Matthias Fawer, Bank Sarasins Senior Sustainability Analyst, also predicted that a number of new markets would emerge in 2011, which would make up at least 500 MW a year in installations. And, as is evident from the plethora of news, which has flooded in from all corners of the globe throughout the year, a number of new markets, like India, the U.K., China and South Africa have emerged on the solar scene:
Urgent need
In Ernst & Youngs indices, guest columnists Thomas Christiansen, EMEIA (Europe, Middle East, India and Africa) Operations Manager, and Phil Dominy, Senior Executive, both at Ernst & Young, write that there is an "urgent" need for new renewable energy capital, due to the aforementioned market struggles. Mike Bernier, Senior Manager, Tax Credit and Incentive Advisory Services, also for Ernst & Young, adds, "Many in the sector are waiting to see who will be the next player to fall, which is impacting the ability to predict future financing. Those players in the renewables space who can raise capital cheaply will dominate – greater consolidation is coming."
The topic of consolidation was a pertinent one throughout 2011, with many of the leading solar analysts, like those at Bank Sarasin and Jefferies, believing that intensified consolidation and falling component prices will continue to dominate in 2012, leading to a situation where only the vertically integrated will survive.
Pushing forward
So, who will lead the way in 2012? If Ernst & Youngs predictions are correct, emerging markets will push forward the development of the solar industry, and make up the shortfall currently being seen in the more established solar markets.
In its latest solar indices – scores out of 100 are awarded for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies – the U.S. topped the rankings with 72 points. At 64 points, India ranked second, followed by China (61 points), Spain (58 points), Italy (58 points), Australia (53 points), Japan (51 points), Germany (51 points), Morocco (48 points) and France (48 points).
Market status
While installed capacity in Germany may have declined in 2011, figures from German solar industry association, BSW-Solar, and Bank Sarasin point to the fact that the country will remain ahead of most competitors, and will add approximately five to six GW of PV to its grid in 2011. It also achieved a milestone in 2011, having installed its millionth PV system. Meanwhile, January will see a 15 percent reduction of its feed-in tariff (FIT). This, coupled with expected mid-year cuts of between three and 12 percent, has led to predictions that new PV installations will reach 5.4 GW in 2012.
It looks as if Italy, however, will take the installation crown from Germany – despite the debacle over the implementation of its the new Conto Energia IV, witnessed at the start of 2011 – adding 6.5 GW of PV capacity to its grid between January and September 2011 alone. Other neighboring countries, mentioned below, also look ready to challenge the former solar King.
Following the collapse of its market in 2009, Spain has been rather quiet on the solar front and is still facing "falling profits and legal wrangling". Indeed, last March, Spains national energy commission, CNE, suspended solar subsidies for 350 installations, after finding that that they were not generating electricity when they claimed to be. Despite this, there were a few announcements at the end of 2011, which could mark the start of a slow revival for the country, including Germanys BayWa and Wirsols 70 MW project plans. Ernst & Young also points out that its concentrated solar power (CSP) market is still the biggest in the world.
Expectations were that France would be a leading PV market in 2011. However, in March of last year, the French Government placed a 500 MW cap on the market and cut the FITs so that all ground-mounted PV systems would receive a tariff of just 0.12 per kilowatt hour (/kWh), as would rooftop systems over 100 kW in size. Despite this, highlights from 2011 include the countrys first copper, indium, gallium, (di)selenide (CIGS) thin film solar project, executed by Belectric and Solar Frontier; a new 30 million government-funded smart grid project, under which 500 PV systems will be installed by Tenesol; and the unveiling of Siemens 31 MW PV park in the department of Alpes-de-Haute-Provence.
Japan had one hell of a year in 2011, to be blunt. Rocked by the March earthquake and tsunami, which triggered the subsequent nuclear disaster, the countrys energy industry has come under the spotlight recently. A positive effect has been the announcement that it will broaden its FIT to include residential, commercial and ground-mounted installations. Overall, however, there is still considerable uncertainty regarding the country's embrace of solar power in coming years, and indications are that Japan will, unfortunately, keep on supporting nuclear.
Emerging markets
As the industry witnessed already in 2009, Asias presence in the solar industry has been increasingly strong. China, in particular, saw a flurry of activity in 2011, after the country introduced a FIT in the summer. While the SolarWorld-led trade dispute may have put a dampener on its rollercoaster ride, according to Ernst & Young, it is now looking to the African markets in terms of selling its solar equipment and has confirmed that it will execute six solar projects there this year. At its third quarter earnings call, Suntechs founder and CEO, Zhengrong Shi said he believes as much as four GW of PV capacity could be added to the Chinese grid this year.
Australia experienced a tumultuous time in 2011, with news flooding in throughout the year pertaining to solar subsidy cuts and slashed support. Despite this, the market remained attractive and there was some good news to emerge. For example, the countrys largest building integrated PV project – 220 kWp – was grid connected at the Carrara football stadium in December. It was also revealed that over 500,000 homes now feature PV systems. Looking ahead, companies like JinkoSolar, are predicting that the country will be an important solar player.
In the U.S., installed capacity is said to be over 2.5 GW. However, due to the impending end of the 1603 treasury grant program and future uncertainty of the Department of Energy funding on the back of the Solyndra debacle, coupled with the looming financial crisis, investor confidence is declining, which could result in a shrinking project pipeline. There is also fear that companies wishing to execute PV projects on land out with the Bureau of Land Managements recently released solar energy zones could see waiting times for project approvals double. Overall, the market is still a crucial one for many companies, and expectations are that it will play an key role in the solar industry.
India experienced a very successful year in 2011, having unveiled its first "big ticket" project – a 30 MW PV park in Gujarat. And, while cumulative grid connected PV capacity as of the end of September 2011, amounted to just 46 MW, Indias solar pipeline, including CSP projects, is said to be sitting at well over two GW. Meanwhile, under phase two, batch two of the National Solar missions bidding round, PV projects worth 350 MW have been approved.
In Israel, 61 MW of solar capacity has been added to the countrys grid to date. However, the tariffs were recently changed. In 2008, for solar, incentives were roughly 0.38/kWh for installations below 50 kW, and around 0.31/kWh for installations above 50kW and below five MW. In 2011, they were cut, but the size of plants that can receive a tariff increased. As such, the rates are circa 0.20/kWh for solar – expected to be applied retroactively to 200 MW of already approved projects – and the new caps are 460 MW for large solar fields and 100 MW for rooftop PV systems.
Tunisia has been identified as having "excellent" resources for developing solar energy, and a favorable tax climate. While only 0.6 megawatts (MW) of solar has been installed to date, it benefits from a favorable tax climate, and has access to "good grant and soft loan availability" with over US$2 billion having been made available, according to Ernst & Young. The countrys first PV panel production facility also opened its doors on December 15. In an interview, CEO of NR-Sol told pv magazine that initial capacity will be 25 MW. However, there are plans in place to ramp up to 100 MW and to manufacture high efficiency solar cells.
Morocco has been fairly quiet on the solar front to date. This is set to change though, after Desertec announced at the end of last October that it will build a 500 MW solar power plant there this year. Furthermore, the World Bank approved a 297 million U.S. dollar loan in 2011 to the country to aid in the financing of the Ouarzazate CSP Plant Project, set to be 500 MW in size.
While the Ukraine also has a favorable tax climate and FIT of over 0.40/kWh, there was only seven MW of installed solar capacity in the country before Active Solar completed its 80 MW plant last summer and began work on another system, which is currently sitting at 60 MW. The final project size has not yet been released.
Argentina has been identified as "ideal" for solar development, particularly in its eastern plains and north western regions. To date, just 10 MW of solar has been installed there, however the government has set a target by which it aims to install 3.3 GW by 2020. FITs have additionally been introduced. For solar, around 150 will be awarded per MWh.
South Africa is another promising PV market. The first round of the Governments renewable energy program closed in December. Under it, 1.4 GW worth of projects across wind, PV, CSP and small hydro were successful. Of this, 18 PV projects were selected, with a total capacity of around 631 MW. Overall, the government aims to see 3.75 GW of renewable capacity installed in the country. Scatec Solar, Solar Capital, and a consortium comprised of SolarReserve, Intikon and the Kensani Group, are just some of the companies that have been selected as preferred bidders for projects worth 75 MW each. Construction for many is expected to begin this spring.
Malaysia has also just approved a FIT scheme, prompting a flurry of project proposals. Indeed, on December 1, the Sustainable Energy Development Authority Malaysia began accepting applications for projects from 2012 to 2014 through an e-FIT online system. By December 2, 201 proposals for 143.78 MW worth of PV projects had been submitted.
Markets like the U.K. and Greece are also displaying positive solar signs, despite having encountered, for example, FIT and financial problems this year. At the start of last year, the U.K. government predicted that just 86 MW of PV would be installed in the country in 2011. Ray Noble, from the Renewable Energy Association, disputed this, and said 500 MW would be a more accurate figure. And, in fact, newly installed capacity is currently sitting at over 600 MW.
Meanwhile, in Greece, plans are underway to construct a 20 GW PV project. Whether or not it will be implemented, however, remains to be seen.
Thailand is another growing market, with many companies undertaking projects there. Sharp, for instance, is working on a 73 MW PV park in the Lop Buri Province, and DuPont Apollo completed an 8.7 MW system in the Prachin Buri Province. Astronergy also intends to install projects in the country. CEO Liyou Yang commented, "Solar energy could soon be a key energy source in Thailand. Considering its strong demand in energy and rising prices of imported oil or coal, PV is an excellent way to contribute energy without any other emissions."
Insufficient
Hungary may have high solar irradiation but, says Ernst & Young, the country falls down on its "insufficient" grid capacity and "very difficult" permitting processes. At the end of last year, just 1.6 MW of solar had been installed there. However, the company points out that there is a pipeline of projects waiting to be executed, between 50 and 80 MW each in size. Sanyo also opened a 150 MW manufacturing facility in the country last March, to produce its HIT solar modules. "The main reason behind the slow market expansion is likely to be the low FIT level, roughly equal to the average electricity price and therefore offers little incentive," states Ernst & Young.
At the end of 2010, Belgium had connected more than 420 MW of PV capacity to the grid, and predictions by Bank Sarasin were that it would add a further 120 MW in 2011. So, while the country definitely has a presence on the solar scene, it is still a relatively small player. That said, aleo solar, for instance, announced that its sales grew more than four-fold in the country this year. Hanwha SolarOne, meanwhile, said that Belgium represented its third biggest market, after Germany and the U.S. Tenesol also entered the market last year with the establishment of its subsidiary and, before it went bankrupt, Solyndra installed a three MW PV system in Brussels.
Poland, like Holland and Denmark, is another small fry in the solar world. Last August, it was announced that construction work was drawing to a close on its first megawatt PV power plant. Aside from this project, installed capacity stands at just 0.1 MW. In addition to less insolation than that of Southern Europe, potential investors are not said to be encouraged by the countrys domestic solar support scheme.
Romania has, to date, been a solar no show. However, according to Ernst & Young, it appears likely that the countrys government is close to finally approving its new renewable energy law, the application of which has been stalled since 2008. On July 13, 2011, the European Commission finalized its review process and went on to approve Law 220/2008, subject to a number of revisions. If it comes into play, it will become "one of the most attractive renewable energy schemes." Under it, six green certificates would be awarded to each PV project, worth between 162 per MWh and 330 per MWh.
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