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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 …

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