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How to follow renewable energies into emerging markets


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Six suggestions to leverage the growing renewable energy opportunities in emerging markets.

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How to follow renewable energies into emerging markets

  1. 1. How to follow renewable energiesinto emerging markets February 2013 www .t hi s i sxy .c o m
  2. 2. X&Y PartnersHow to follow renewable energies into emerging marketsContacts:Romeu Gasparromeu.gaspar@thisisxy.comUK: +44 (20) 3239 5245 | PT: +351 210 961 834Skype: xypartners 2
  3. 3. X&Y Partners How to follow renewable energies into emerging marketsHow to follow renewable energies into emergingmarketsSix suggestions to leverage the additional revenue, but also a risk forgrow ing renew able energy increased costs and diluted marketopportunities in em erging focus. In this article we explore sixm arkets. suggestions to develop and implement a sensible market entry strategy forLarge-scale deployment of renewable emerging markets.energies has so far been concentratedin Europe and in the US, but that is 1. Follow existing clients intochanging. Take wind energy, solar PV emerging marketsand CSP (Concentrated Solar Power), Following existing clients (or partners)for instance: 44%, 35% and 23%, into new markets is often a good pointrespectively, of new capacity for the to start, as it reduces expansion costsnext 5 years will be deployed in and risks, while giving companies aemerging markets (Exhibit 1). For chance to scout different marketsNorth American and European before settling down on the mostcompanies that have so far focused on attractive ones. For companies thatdomestic markets, emerging markets get most of its turnover from a limitedcan thus represent an opportunity forExhibit 1 – Regional breakdown of cumulative and new capacity for wind energy, solar PV andCSP 3
  4. 4. X&Y Partners How to follow renewable energies into emerging marketsExhibit 2 – Example of a company for which market expansion was a necessity, rather than anoption 2. Do not overlook domesticnumber of clients, following key marketsaccounts into emerging markets mightnot even be an option but rather a One of the biggest risks of a marketnecessity: Exhibit 2 illustrates a expansion operation, especially forcompany that simultaneously needed smaller companies, is to overlookto increase the share of wallet on its domestic markets. This holdstop 5 clients and expand to Asia and particularly true for the renewableSouth America, just to maintain the energy sector, which will continue tosame turnover. offer opportunities in Europe and the US (Exhibit 1).Following existing clients intoemerging markets is often more A good market strategy will oftenstraightforward than it seems: when balance domestic and emergingfacing an unknown market, most markets, as well as existing and newEuropean and US companies will clients (Exhibit 3): retaining andchoose to continue to work with acquiring clients in domestic marketsexisting suppliers that they know and offers a lower business developmenttrust. Expect however smaller cost, while expanding into newcontracts, as your client will probably markets presents an opportunity foraward the less critical elements of the faster growth.project to local suppliers. 4
  5. 5. X&Y Partners How to follow renewable energies into emerging markets Exhibit 3 – Example of a market strategy that balances domestic and emerging markets, as well as existing and new clients announced projects, meaning that at that stage you are already probably3. Look beyond market hype too late. An alternative approach is toFor business development purposes, try to identify early stage marketthe most talked-about emerging opportunities. Rather than looking formarkets are often not the most ambitious statements of intention, lookinteresting ones. Renewable energy for countries that can genuinely benefitmarket buzz is mostly generated by from renewable energies. Take theongoing procurement programs and Kingdom of Saudi Arabia, for instance:Exhibit 4 – The Kingdom of Saudi Arabia’s KA-CARE Program 5
  6. 6. X&Y Partners How to follow renewable energies into emerging marketsExhibit 5 – An example of a niche market opportunity: renewable energy installations for thegrowing demand for off-grid telecom towers in emerging countriesthe Middle East is nothing more than ablip in IEA’s forecasts at this point, but 4. The larger markets are notthe country has announced one of the necessarily the most attractive onesworld’s most ambitious renewable For smaller companies and nicheenergy programs (Exhibit 4). While it is players, going off the beaten tracklikely that the program will start later might be a more attractive option thanand run smaller than intended, there fighting for the larger markets. Thisare bona-fide reasons for the adoption option requires however aof renewable energies in Saudi Arabia: fundamentally different approach:i) given the reduction of wind and PV instead of looking for large volumecosts (and the potential of CSP to do and/or high growth markets, theseso) renewable energies can already companies should ask themselves twodisplace some types of fossil fuel questions: i) Which emerging marketsgeneration, freeing oil to sell in are moving in a direction that willinternational markets; ii) the country create demand for our products andand its major companies have the services?; and ii) What products andfunds necessary to support the services can we develop to betterassociated higher investment costs; address that demand? For instance, inand iii) renewable energies are labor a previous article we have discussedintensive across the entire value chain, how recent developments in solar PVoffering attractive opportunities for might overthrow the diesel generatorlocal economic development. 6
  7. 7. X&Y Partners How to follow renewable energies into emerging marketsas the technology of choice for off-grid circumvented in some base stations, which face Exhibit 6 illustrates ourgrowing demand in emerging countries recommendation to a European(Exhibit 5). manufacturer of PV inverters that had a limited budget to expand to four5. Combine local presence with different markets. While localglobal scale Engineering and Sales teams wereThe value of local presence is indispensable for most markets, otherunquestionable: business functions such as Installation andopportunities in most emerging Post-service could be more efficientlycountries are identified, developed and handled through local partners.closed face-to-face, in the local Furthermore, upstream functions suchlanguage and according to local as R&D and Manufacturing required acostumes. Furthermore, a growing combination of global and localnumber of countries have local content coverage, as the former ensuredrequirements for renewable energy economies of scale and the latterprojects, favoring projects that use satisfied local content requirements.elements developed, manufactured or 6. Ask aroundsourced locally. Unsure of which markets to target, orHowever, setting up local presence is how and when to target them?expensive, and can arguably be Gauging your clients, suppliers andExhibit 6 – Example of a market entry strategy that combines economies of scale and globalkey accounts with local partners and local presence 7
  8. 8. X&Y Partners How to follow renewable energies into emerging marketsExhibit 7 – Example of a company benchmark and expert interview process Exhibit 8 – Example of an expansion plan sanity checkemployees for opinions, interviewing Exhibit 8 illustrates a comparisonexperts, and benchmarking your between the revenue and EBITDAcompetitors can reveal important growth expectations of an expansioninsights (Exhibit 7). The latter option is plan, with what similar plans fromalso a good way to check if your competitors had achieved in the expansion strategy is sensible: 8