Flying High on Winds of Change: Role of Wind Energy Legislation in Developing Economies


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This presentation focuses on the global wind energy market, mainly: the effects/impact of the economic downturn on emerging economies and the global wind energy market in 2009, stimulus measures of emerging economies, market dynamics, and global installed wind power capacity.
Also, the presentation touches on: wind legislation in developing economies, the ranking of countries based on emerging opportunities, drivers directing global wind energy market, and growth opportunities in the global wind energy market.

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Flying High on Winds of Change: Role of Wind Energy Legislation in Developing Economies

  1. 1. Flying High on Winds of Change: Role of Wind Energy Legislation in Developing Economies<br />SwetaRamchandran, Research Analyst <br />Economic Research & Analytics Division<br />Energy & Power Systems <br />October 07, 2009<br />
  2. 2. Focus Points<br />Global Wind Energy Market<br />Wind Legislation in Developing Economies<br />Ranking of Countries Based on Emerging Opportunities<br />Drivers Directing Global Wind Energy Market <br />Growth Opportunities in Global Wind Energy Market<br />
  3. 3. Global Economy: Effects and Impact of Economic Downturn in 2008-2009 on Emerging Economies<br />Global financial and economic crisis results in recession <br />Russia<br />Drop in oil prices due to slower growth in Europe and US<br />Poland<br />European banks withdrew investments from eastern Europe, diminished exports <br />Mexico<br />Slowdown of funds remittance from US<br />Brazil<br />Withdrawal of Foreign Institutional Investors (FII) inflows, currency depreciation, slowdown in export of oil and other commodities<br />China<br />Fall in exports, reduction in trade and investment<br />India<br />Industrial production slowed down, fall in demand and exports<br />3<br />
  4. 4. Global Economy: Emerging Economies and Stimulus Measures<br />More than $2.0 trillion in 2009 via fiscal stimulus injected by Governments <br />worldwide to spur aggregate demand<br />Poland<br />Fiscal measures- Additional fiscal spending, additional credit. June 2009- Unemployment dropping and overall industry climate indicators and trade improving<br />Q1 2009 (yoy)- 1.7 % <br />Q2 2009(yoy)-1.4%<br />Russia<br />Fiscal measures – cuts in interest rates and strengthening of financial sector and support to real economy. June 2009- Unemployment falling, investment and retail sales rising<br />Q1, 2009 (yoy) – (9.7%)<br /> Q2, 2009 (yoy) – (10.9%)<br />Mexico<br />Lower interest rates are less effective in jump-starting economy. Dramatic fall in tourism.<br />Q1 2009 (yoy)- (8.4%)<br />Q2 2009 (yoy) – (9.7%)<br />China<br />Stimulus package-$586 bn<br />Medical care and Education - $5.8 bn<br />R&D and Innovative Projects - $23.4 bn<br />New Medical Reform Plan - $123.00 bn<br />Q1, 2009 - 7.1 % <br /> Q2,2009 - 7.9% <br />Brazil <br />Increased lending by state banks, Central Bank support for corporate foreign debt and monetary easing to partly offset impact of global slow down<br />Q1, 2009 (yoy) – (1.8%) <br />Q2, 2009 (yoy)– (1.2%) <br />India<br />Three stimulus packages with tax cuts, Cut in Reserve Bank of India repo rate and fall in Cash Reserve Ratio. June 2009 - Business and investment improving. Economic growth to gain momentum in second half of 2009<br />Q1, 2009 - 5.8% <br />Q2, 2009 - 6.0% <br />
  5. 5. Effects and Impact of Economic Downturn: Global Energy Market in 2009<br /><ul><li>High capital intensive energy industry faces dip in future flow of investment due to weakened conditions in credit</li></ul> availability and commodities market<br /><ul><li>Beyond 2009, the road to global economic growth and recovery to be muted due to growing fiscal deficits even as </li></ul> world economies take to development of renewable energy including wind<br />Eastern Europe<br /><ul><li>EU and Role of European Economic Recovery Plan</li></ul>Asia Pacific<br /><ul><li>China: To spend $585.5 billion stimulus by 2010. Specific to alternative energy, a *$440.0 billion has been planned to focus on boosting green energy via solar and wind
  6. 6. India: No direct stimulus allocated for energy sector across the three stimulus packages aiming at monetary easing
  7. 7. South Korea: $50.0 billion stimulus package supports expansion of the use of renewable energy and green technology</li></ul>North America <br /><ul><li>U.S: $787.20 billion includes varied grants, loan guarantees, and grants-in-lieu-of-tax-credits encouraging renewable energy including wind energy
  8. 8. Canada: $62.0 billion stimulus under Canada’s Economic Action Plan includes resources for enhance energy efficiency, Green Infrastructure Fund (GIF) and carbon capture and storage (CCS) technologies</li></li></ul><li>Global Wind Energy Market: Market Dynamics<br /><ul><li>Energy security, climate change and oil and gas price volatility makes wind power one of the fastest growing forms of energy generation
  9. 9. Long run demand for electricity high making wind energy a vital source for generation
  10. 10. Green energy production has been increasing post Kyoto Protocol </li></ul>Key <br />Features<br />Wind <br />Energy <br />Statistics<br /><ul><li>End of 2008
  11. 11. Global total installed capacity: 120,798 MW
  12. 12. Global new installed capacity: 27,051MW
  13. 13. Investments in turbine installation increased to $47.00 billion (2008) from $37.00 billion (2007)</li></ul>Key <br />Participants<br /><ul><li>Independent power owners
  14. 14. Independent project developers
  15. 15. Original equipment manufacturers
  16. 16. Component manufactures
  17. 17. Sub-suppliers
  18. 18. For an investor,
  19. 19. Investment in wind power market based on geo-political risk, growing energy demand and national greening initiatives
  20. 20. Specifically, focus is to understand the greening legislative framework prevalent across: India, China, Bangladesh, Pakistan, Czech Republic, and Poland</li></ul>Need of <br />the Hour<br />
  21. 21. Global Installed Wind Power Capacity in 2008<br />Germany: 23,903 MW<br />Denmark: 3,180 MW<br />United Kingdom: 3,241 MW<br />`<br />France: <br />3,404 MW<br />Portugal: 2,862 MW<br />China:<br />12,210 MW<br />Spain:<br /> 16,754 MW<br />United States: 25,170 MW<br />India:<br />9,645 MW<br />Italy: <br />3,736 MW<br />Key Observations<br /><ul><li>Beginning of 2009 saw United States, Germany, Spain, China, and India emerge as top nations in terms of total installed capacity
  22. 22. In 2010, Frost & Sullivan expects slower global growth in wind energy market due to tightened credit environment</li></ul>Source: Global Wind Energy Council 2008 and Frost and Sullivan<br />
  23. 23. Wind Legislation in Developing Economies<br />Asia<br />India, China, Pakistan and Bangladesh<br />Eastern Europe<br />Poland and Czech Republic<br />
  24. 24. Need for Wind Energy Legislation<br />Wind Energy Capacity, (Global), 2005- 2015<br />Source: Frost & Sullivan<br />Key Observations<br /><ul><li>Frost and Sullivan predicts that wind power market is expected to grow from 2008 to 2015 at a compound annual growth rate
  25. 25. (CAGR) of 22.1 percent in terms of installed capacity, reaching 490,804 MW at the end of this period.
  26. 26. No uniform worldwide legislation exists to promote wind energy for electricity generation
  27. 27. Strong legislative and fiscal climates stimulate wind energy generation in US, EU, and China
  28. 28. At country level, wind energy generation seeks a legislative framework backed by fiscal incentives</li></li></ul><li>Wind Legislation in India<br />Indian legislative framework does not define the amount of electricity that could to be generated<br />via renewable energy<br /><ul><li>Section 3 (1) of the Electricity act of 2003 defines power development and encourages wind power generation
  29. 29. State Electricity Regulatory Commissions (SERCs) set Renewable Portfolio Standards
  30. 30. Indian Integrated Energy Policy of 2006</li></ul>Legislative <br />Highlights<br /><ul><li>At the Central level: Ministry of New and Renewable Energy (MNRE)
  31. 31. At the State Level: SERCs
  32. 32. Indian Renewable Energy Development Agency Ltd (IREDA), Centre for Wind Energy Technology (C-WET), </li></ul> and Indian Wind Turbine Manufactures Association (IWTMA)<br />Nodal<br />Agencies<br /><ul><li>Varying Incentives and tariff norms across states for wind energy generation
  33. 33. Unique renewable portfolio standards and feed-in-tariff systems in place
  34. 34. Open FDI, income tax breaks, concessional import duty on specified wind turbine parts, loans through IREDA
  35. 35. National Wind Power Program, Generation Based Incentive (GBI) Scheme, Small Wind Energy and Hybrid </li></ul> Systems‘ promote wind energy development<br /><ul><li>National Action Plan on Climate Change and CERC in tariff regulations for electricity</li></ul>Incentives <br />and Other <br />Policy <br />Measures<br />Key <br />Players<br /><ul><li>Suzlon, Enercon, Vestas RRB India Ltd</li></li></ul><li>Wind Legislation in China<br />The Chinese legal framework encourages wind energy generation via national level <br />renewable energy law <br /><ul><li>Chinese Renewable Energy (RE) Law passed in 2005 identifies non-fossil sources of energy including wind
  36. 36. Grid operators to purchase resources from registered renewable energy producers
  37. 37. National Development and Reform Commission (NDRC) had set a 2010 wind energy target of 5 GW, </li></ul> which the country achieved in 2007<br /><ul><li>National Mid and Long-Term Development Plan and Clean Production Promotion Law and Renewable Energy </li></ul> Law (2005) encourages renewable energy indirectly<br />Legislative <br />Highlights<br />Nodal<br />Agencies<br /><ul><li>NDRC organizes and implements the national, economic and social development strategies
  38. 38. NDRC-backed National Energy Commission (NEC) has been coordinating national energy-related policy </li></ul> since 2008<br />Incentives <br />and Other <br />Policy <br />Measures<br /><ul><li>Differentiated wind energy tariffs in NDRC’s new program issued in July 2009,
  39. 39. RE law- backed varied incentives and tax status for wind especially for Chinese domestic producers
  40. 40. A ‘10 GW Size Wind Base Programme’ (Wind Base) developed by the NEC identifies potential wind energy sites</li></ul> capable of generating more than 10 GW of installed capacity per site by 2020<br />Key <br />Players<br /><ul><li>American Superconductor, Suzlon, GE, Goldwind Science and Technology, Sinovel Wind Co., Ltd., Xinjiang </li></ul> Goldwind Science & Technology Co and Dongfang Electric Corp<br />
  41. 41. Wind Legislation in Pakistan<br />Pakistan’s weak energy policy for harnessing renewable energy for electricitygeneration makes wind energy incentive driven<br /><ul><li>'Policy for Power Generation Projects Year- 2002'
  42. 42. Alternative Energy Development Board’s (AEDB) aim is to generate 9,700 MW through renewable energy </li></ul> technologies by 2030<br /><ul><li>Medium-term Development Frame Work (MTDF), from 2005 to 2010, a five year plan that also covers</li></ul> the importance of renewable energy)<br />Legislative <br />Highlights<br />Nodal<br />Agencies<br /><ul><li>AEDB
  43. 43. National Electric Power Regulatory Authority (NEPRA)
  44. 44. Pakistan Council of Renewable Energy Technologies (PCRET)
  45. 45. Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan (1994)
  46. 46. 'Policy for Power Generation Projects Year- 2002‘ suggests a two-part tariff structure consisting of fixed capacity and </li></ul> variable energy component indirectly encouraging wind energy participants<br /><ul><li>'Policy for Development of Renewable Energy for Power Generation' (issued in 2006) and concept 'Wind Risk </li></ul> Coverage<br /><ul><li>Incentives for renewable energy based power projects include assured grid connection, a guaranteed market </li></ul> offering, mandatory purchase of electricity. Production incentives include a production bonus payment to the IPP, <br /> earning carbon credits by registering for CERs<br />Incentives <br />and Other <br />Policy <br />Measures<br />Key <br />Players<br /><ul><li>Zorlu Enerji Group </li></li></ul><li>Wind Legislation in Bangladesh<br />No separate legislation defines the need for wind energy for electricity generation in Bangladesh<br /><ul><li>National Energy Policy (NEP) (1996) ‘ensures’ optimum development of all the indigenous energy sources</li></ul> including wind<br /><ul><li>Private Power Generation Policy (1996)
  47. 47. Renewable Energy Policy formulated in 2008</li></ul>Legislative <br />Highlights<br />Nodal<br />Agencies<br /><ul><li>Bangladesh Power Development Board (BPDB)
  48. 48. Dhaka Electricity Supply Authority (DESA) and Rural Electrification Board (REB)
  49. 49. A body called ‘Renewable Energy Development’</li></ul>Incentives <br />and Other <br />Policy <br />Measures<br /><ul><li>Renewable energy project investors both in public and private sectors shall be exempted from corporate income</li></ul> tax for a period of 15 years<br /><ul><li>Others include exemptions from corporate tax for 15 years, low-interest loans and a cap of 3.0 % on </li></ul> import duty and value-added tax.<br />Key <br />Players<br /><ul><li>High potential for existing wind power players </li></li></ul><li>Wind Legislation in Developing EU Countries: Poland and Czech Republic<br />At the EU level, complete flexibility is given to each Member State in deciding their preferred &apos;mix&apos; of renewable energy including <br />that of wind<br /><ul><li>RES Directive on Electricity Production from Renewable Energy Sources
  50. 50. By March 2010, each Member State to prepare and present a National Action Plan (NAP) to EU Commission
  51. 51. By 2020, 20% of electricity generation from renewable energy (of which wind energy to contribute 12%)
  52. 52. EU directive requires Poland and Czech Republic to achieve 15% and 13% respectively of its final energy consumption </li></ul> from renewable energy by 2020<br />Role of EU<br />Poland<br />Czech Republic<br />Legislative <br />Highlights<br /><ul><li>Polish Energy Law
  53. 53. Polish Building Law
  54. 54. Act No 180/2005 of the Czech Republic legislation implements </li></ul> the promotion of electricity produced from renewable energy <br /> source<br />Nodal<br />Agencies<br /><ul><li>Energy Regulatory Office’ (ERU)
  55. 55. Ministry of Industry and Trade
  56. 56. Ministry of Economy
  57. 57. RES driven by green certificates rather than </li></ul> the Renewable Energy Feed-In Tariff (REFIT) <br /> system<br /><ul><li>Subsidies and preferential credits for RES</li></ul> projects provided by the National Fund for<br /> Environment Protection and Water Management<br /><ul><li>Role of Natura 2000
  58. 58. Poland’s Energy Policy up to 2030
  59. 59. Choice of selecting between a feed-in-tariff or a green bonus
  60. 60. A guarantee of revenue per unit of electricity produced over </li></ul> a 15-year period as of the date a plant is put into operation exists<br /><ul><li>100.0% property tax reduction on certain renewable </li></ul> technologies <br /><ul><li>‘State program for energy saving and use of renewable energy </li></ul> sources’ <br /><ul><li>Onshore wind energy investors are entitled for 15 years of</li></ul> support under feed in tariff mechanism<br />Incentives <br />and Other <br />Policy <br />Measures<br />Key <br />Players<br /><ul><li>Enercon, GE Energy, Vestas, Gamesa</li></li></ul><li>Growth Opportunities in the Wind Energy Sector: Roadmap Beyond 2009<br />Lower demand for energy, fluctuating energy prices, weak exchange rates, and less credit availability will make the economic recovery of the global wind energy sector sluggish in 2010<br />CEE<br /><ul><li>Europe's offshore installed wind power capacity to grow from 1.9 GW (2009) to 40.0 GW (2020)
  61. 61. Poland and Czech Republic to look at enhancing </li></ul> wind power generation as: <br /><ul><li>Poland to achieve minimum share of electricity from RES from 3.6% (in 2006) to 7.5% (in 2010), and 14.0 % (in 2020). Wind energy generation accounts for 463MW (Beginning of 2009)
  62. 62. Czech Republic’s share of RES in electricity to grow from around 4.0 % (at the end of 2008) to 13.0 % (by 2020). Wind energy generation accounts for 150MW (Beginning of 2009)</li></ul>China<br /><ul><li>Less than 1.0% of electricity supply comes from wind energy in 2009
  63. 63. Installed wind capacity target to reach 30.0 GW by 2020 making renewable energy supply 40.0% of the energy market by 2050
  64. 64. From being a world leader in the manufacturing of micro and small wind turbines in 2009, China to enter large </li></ul> wind turbine production market to build its currently underdeveloped transmission system <br />Bangladesh<br /><ul><li>Expected to address issues concerning lack of regulation defining the tariff norms as being a new entrant into the renewable energy market</li></ul>Pakistan<br /><ul><li>700.0 MW of wind power by 2010, 3,000.0 MW by 2020, and 9,700.0 MW by 2030
  65. 65. Overhaul of existing energy policy to solve load shedding problem
  66. 66. Indirectly, greater exploitation of nations’ wind corridor via incentives can be expected</li></ul>India<br /><ul><li>From 9,645.0 MW (beginning of 2009) of installed wind capacity, India to achieve a total wind power capacity of 10,500.0 MW (ongoing) by 2012
  67. 67. Government to continue with fiscal incentives to encourage wind energy participants</li></li></ul><li>Ranking of Countries Based on Emerging Opportunities<br />Global Total Installed Wind Power Capacity, 2009*<br />Note: * The figures are estimates<br />Source: by Frost & Sullivan<br />Ranking of Specific Economies based on Qualitative Indicators**<br />Note:<br />1.** Ranking based on economic growth expected between 2010-2012, political and legislative environment supporting future wind energy development <br />2. Green indicates positive environment <br /> Orange indicates mixed environment<br /> Red indicates scope for major overhaul <br />
  68. 68. Drivers Directing Global Wind Energy Market <br /><ul><li>Positive fiscal climate such as incentives for feed in tariffs, subsidies for wind power generation, programs (such as Foreign direct investment, income tax breaks, easy available credit)
  69. 69. Drivers directing global wind energy market:
  70. 70. Assessing existing national electricity policies and electricity supply mixes in potential wind energy nations of Asia and East Europe
  71. 71. Increasing population levels in some Asian economies to change trends in energy demand- and supply mix
  72. 72. Growth in wind energy driven by increased global uncertainties regarding steady supplies of conventional and indigenous power resources like oil and natural gas
  73. 73. Globally, increased awareness concerning environmental, ecological, and geopolitical risks surrounding generating electricity to lead to drive wind energy market</li></li></ul><li>Growth Opportunities in Global Wind Energy Market<br /><ul><li>Domestic manufacturing of turbines including design, installation, operation and associated wind energy services to emerge (Globally)
  74. 74. Integration of the wind energy with electricity grids to cause increased demand for specialized manpower resources for operating grid systems (in East Europe and Asia)
  75. 75. Demand for micro wind turbines and technological databases to emerge (in East Europe and Asia)
  76. 76. Turbine and tower market to witness private sector collaboration and additional capital investments (in Asia)
  77. 77. Innovation and development expected in turbine design, gearboxes, generators, and larger capacity machines (in Asia aiming at rural electrification)
  78. 78. Demand for energy-efficient renewable energy technologies such as growth in technology option called compressed air energy storage (CAES) aiding large scale storage of wind energy (in Asia)
  79. 79. Service offerings such as repairs, replacement, and other operations and maintenance related aspects concerning wind power component (in India and China)
  80. 80. Reviewing investment in newer entrants such as Pakistan and Bangladesh that are low in energy supply when compared to actual electricity demand</li></li></ul><li>Next Steps<br /><ul><li>Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. ( 1-877-463-7678 or +44 (0)20 7343 8383
  81. 81. Register for the next Chairman’s Series on Growth: Transforming Information into Profit—The CEO’s Perspective on Competitive Intelligence and Competitive Strategy (November 3rd)(
  82. 82. Register for Frost & Sullivan’s Growth Opportunity Newsletters and keepabreast of innovative growth opportunities.(</li></li></ul><li>Your Feedback is Important to Us<br />Growth Forecasts?<br />Competitive Structure?<br />Emerging Trends?<br />Strategic Recommendations?<br />Other?<br />What would you like to see from Frost & Sullivan?<br />Please inform us by taking our survey.<br />
  83. 83. For Additional Information <br />SandeepMaheshwari<br />Vice President, E&S <br />Economic Research and Analytics (ERA) Division<br />+001 (210) 326-0456<br /><br />Naylor Gray<br />Director, Global Marketing<br />+001 – 210- 247-2437<br /><br />T.J. Sivan<br />Industry Manager<br />Economic Research and Analytics (ERA) Division<br />+91 (044) 420-44500<br /><br />