Picking winners and losers


January 10, 2013

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‘The good thing about 2013?’ queried a senior finance executive, when asked what he thought the year might hold for the sector, ‘It’s no longer 2012’.

It’s a view that seems to be echoed across the sector as we pass through the first nervous weeks of January. For many, last year wasn’t an experience to be repeated.

In some countries, political support for renewable energy evaporated – quickly becoming a fierce battleground for green energy lobbyists. Economic austerity measures continued to place downward pressure on the industry in the US and Europe, and the Chinese market began to cool as the industry outpaced its supporting infrastructure.

Despite what many ‘future gazers’ will tell you about the next twelve months, it is of course too early to tell. However, the past seven days have seen a couple of developments that, on one hand, set a good portent for the remainder of the year. And now require careful examination before attracting too much hubris.

In the US, legislative measures to prevent the arrival of a ‘fiscal cliff’ included the extension of the Production Tax Credit. Good news on its own, of course, but in a further industry encouragement, the Bureau of Ocean Energy Management (BOEM) issued a formal request to gauge whether there would be any commercial interest in the development of a 350MW project off the coast of New York.

With many predicting only light construction for US wind in 2013, the announcement served as a small fillip in a market that many have already written off. Importantly, it was a reminder that, despite being somewhat embryonic, US offshore wind still has big ambitions and dismissing it entirely may be premature.

Contrast these US developments with an announcement from the Bulgarian Government, clarifying its intentions to secure 16% of domestic energy from renewables, though, and its evident that the international market is still unclear as to which countries to bet heavily on, and back.

When Bulgaria initially embarked on a course towards developing commercial wind energy in 2010, it was greeted with the same optimism that has been held for its near neighbour, Romania.

Yet this changed overnight late last June, when the Government reneged on existing tariff rates; cutting wind energy subsidies immediately by 22%.

And looking at the small print tied up in this week’s development, it’s clear that much of this 16% is expected to come from hydro-power, with wind energy only slated for just 1.4GW.

Despite this, many developers, independent power producers and manufacturers are still treating ‘Eastern Europe’ as a market packed with potential. A sometimes overly optimistic outlook that could all too easily dismiss the complexities of differing political regimes that underpin specific green energy policies, out of hand.

Bulgaria may turn out to be a strong market, but the industry is naïve if it thinks it can secure investors overnight following the shock of last year.

Perhaps the message for 2013 then, is that the wind industry needs to think carefully about the ability to pick winners – and losers. The facts aren’t always what they seem.

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