The research analyses the growth, evolution and investments in renewable energy markets in emerging countries of the world, and identifies potential hotspots for renewable energy investments around the world. The study provides a detailed analysis and investment forecasts in key emerging countries namely, China, India and Brazil, as well as a detailed analysis of financial investments by deal type in key emerging countries.
Global investments expected to reach top $650 billion by 2015
Investments in renewable energy increased from $39.24 billion in 2001 to $336.78 billion in 2009, at a CAGR of 30.8% during the period 2001-09. Total investments in the renewable energy sector have risen by 43.4% in 2009 from $283.11 billion in 2008. Global Investments in the renewable energy industry are mainly driven by policies and incentives offered by the respective federal governments in different countries. The investments in the industry are mainly aimed at creating employment opportunities and driving away the clouds of economic downturn in many nations. Investments in the renewable energy industry are likely to increase in the forecast period 2009-15 and are expected to reach $653.35 billion by 2015.
Debt offering is the major source of investment in the renewable energy, accounting for 44.84% of the total investments in 2009. It is followed by asset financing, which is another key source of investment with a contribution of 22.57% to the total renewable energy investments. Mergers and Acquisitions (M&A), which accounted for 19.19%, and equity offerings, which accounted for 11.95%, are the other major sources of investments in the industry.
Financial investments in emerging nations increased from $1.76 billion in 2001 to $65.86 billion in 2009 at a CAGR of 57.63% for the period 2001-09. China led the investments in Asia, with a total investment of $11.48 billion, mainly in wind and solar PV projects. Total investment in India grew over 100% to $7.17 billion in 2009, of which equity offerings accounted for $3.6 billion. Brazil accounted for most of the renewable energy investment in Latin America in 2009, attracting $7 billion of total investments.
Government support and financial incentives, main drivers
Investments in the renewable energy sector are largely dependent on the regulatory and financial support offered by governments. Governments in emerging economies are promoting the use of renewable energy sources for power generation in order to achieve energy security and curb carbon emissions. The other major reason for promoting investments in renewable energy is the fluctuating energy price of fuel from conventional sources. Investments in the Chinese renewable energy market are driven by various renewable energy policies and incentives provided by the government.
Regulatory restrictions on foreign investments have shielded the wind power market in China during the current global financial crisis. The government in China came up with various incentive plans and policies to promote the development of renewable energy, while two of the largest solar markets, Spain and Germany, are cutting back on their incentives. These policies have boosted and will continue to drive the domestic market and will also create attractive investment opportunities in the country. Similarly in India, the government came up with Generation Based Incentives (GBI), the National Semi-conductor Policy and the National Missions to attract investments in all segments of the renewable energy value chain, thereby driving renewable energy development.
China leads financial investments among emerging economies
Total investments in the Chinese renewable energy industry rose from $163 million in 2002 to around $11.48 billion by 2009, at a CAGR of 84%. Government support is expected to drive future investments in the renewable energy sector in China, which are forecast to grow from $9.38 billion in 2009 to around $42.25 billion by 2015.
Investments in India have increased from $94.58 million in 2001 to around $7.17 billion in 2009, at a CAGR of 72%. In 2009, India had 4.9 GW of newly installed renewable power (including hydro), of which 1.6 GW was contributed by wind and 2.89 GW by hydro power. Investment in renewable energy in India is expected to grow from $7.17 billion in 2009 to around $26.74 billion in 2015, at a forecast CAGR of 24.54%.
Brazil accounted for most of the renewable energy investment in Latin America. Investments there have increased from $614 million in 2004 to around $7 billion in 2009, at a CAGR of 62%. The country is the largest renewable energy market in the region, dominated by hydro and ethanol. The development of the biofuels market in Brazil can largely be attributed to the extensive areas of cultivable land, government support, abundant water resources and cost advantages over competing fuels. Against this backdrop, investments in Brazil’s renewable energy sector are forecast to rise from $9.38 billion in 2009 to around $21.59 billion by 2015.
Technological advancements will drive investments in R&D
There is a drive for the development of new and sophisticated technology, which is more cost effective. Power generation from various renewable sources such as solar, wind, and hydro involves high upfront and operational costs, making it expensive for deployment in developing countries. Technological innovations are underway to make these sources more affordable and efficient, which will result in their wider application. Thus, technological innovations and research and development activities for renewable energy are gathering momentum.
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