Frost & Sullivan: Shrinking Profits, Fiercer Competition, and Price Wars in Some Green Energy Sectors, but 2009 is a Good Time to Invest or Buy

LONDON - After a rough end to 2008, 2009 looks to be a promising year for the
renewable energy industry. Companies are and will be facing a few challenges,
but the market is expected to rise once again. In the new economic climate,
the sector will have to adapt to the factors facing the world economy,
including scarce financial resources, high interest rates, and shattered
investor’s confidence. Companies will also have to battle against shrinking
profits, fiercer competition, and even price wars in some green energy
sectors. However, there are some positive factors influencing the 2009
market, such as lower raw materials and equipment prices. Likewise, project
valuations are back to a reasonable level, which makes 2009 a good time to
invest or buy.

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“The year 2008 started out great for the renewable energy industry. Total
renewable energy investments in the first half of 2008 were on par with
investments in the first half of 2007, which was a record-breaking year,”
says Alina Bakhareva, Green Energy Research Manager at Frost & Sullivan.
“However, the impact of the global economic slowdown struck the renewable
energy industry in the second half of 2008, characterized by the drying up of
capital and plummeting share prices.”

Despite some concerns, a repeat of the events of the 1970s and 1980s when
investments in renewable energy ceased after oil prices collapsed is highly
unlikely. “There are three major reasons for this,” explains Bakhareva.
“First, oil prices are unlikely to fall to the 1990 level for a prolonged
period of time. On the contrary, they might increase due to rising
exploration and production costs fuelled by increased demand from developing
nations. Secondly, renewable energy is much more mature than it was thirty
years ago and is able to deliver power at nearly the same cost as
conventional power sources. Finally, renewable energy is a major tool in
curbing carbon dioxide emissions, and many governments across the globe have
reiterated their will to support the industry through these hard times.”

Renewable energy provides a solution to address the power industry issues
affecting both developing and developed countries. There is now a greater
acceptance and demand for renewable energy in developing countries due to its
ability to help alleviate power sector problems such as power gaps and poor
grid coverage and quality. Developed countries, where the availability of
energy has not been a problem for years, may well be facing power gaps
resulting from phasing out existing coal power and nuclear plants, unless new
capacity is brought online in due time.

Despite a wide political and legislative support that will keep the
renewable energy sector afloat during these difficult times, some players in
the renewable energy market will be hit much harder than others, and some
companies will disappear or become acquired. Companies that are likely to be
affected this way include smaller or cash-constrained developers who are
unable to meet their payment schedules or re-finance, technology developers
with products that are still in early development, equipment suppliers that
are focused on a specific geographical region or client group or who offer
non-differentiated products, and new-entrant raw materials suppliers with
high costs.

Conversely, other players in the renewable energy market will be able to
turn the economic downturn into an opportunity for growth. Such companies
will be able to use the slowdown as a chance to rectify remaining technical
and operational drawbacks and will be ready to enter a new growth wave
well-equipped to support it. Winners who are likely to emerge from this time
of crisis include Original Equipment Manufacturers (OEMs) with comprehensive
service offerings targeting existing renewable energy plants, technology
developers offering solutions based on increased efficiencies, OEMs who
develop or adopt technology advances, and project developers with strong cash
flows, among others.

If you are interested in receiving our complimentary brochures on
the Renewable Energy market in Europe, then send an e-mail to Chiara Carella,
Corporate Communications, at chiara.carella@frost.com, with your full name,
company name, title, telephone number, company e-mail address, company
website, city, state and country. Upon receipt of the above information, a
brochure will be sent to you by e-mail.

GIL 2009: Europe

Frost & Sullivan has expanded its flagship Global Congress on Corporate
Growth - GIL Global - into several major cities around the world including
London. For the first time ever in Europe, Frost & Sullivan will be hosting
the Growth, Innovation and Leadership Congress ‘GIL 2009: Europe’ on 19-20
May, at the Sofitel St James in London. GIL Global is the industry’s only
event designed to support senior executives in their efforts to achieve
sustainable, top-line growth. To register, obtain a programme agenda, explore
sponsorship opportunities, or attend as a member of the media for ‘GIL 2009:
Europe’, please contact Chiara Carella, Head of Corporate Communications for
Frost & Sullivan in Europe, at chiara.carella@frost.com. One-on-One
interviews with Frost & Sullivan senior growth consultants are also being
scheduled. For more information you can also visit www.frost.com/giluk

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to
accelerate growth and achieve best in class positions in growth, innovation
and leadership. The company’s Growth Partnership Service provides the CEO and
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please visit www.frost.com.

Contact:
Chiara Carella
Corporate Communications - Europe
P: +44-(0)-20-7343-8314
M: +44-(0)-753-3017689
E: chiara.carella@frost.com

Source: Frost & Sullivan

Chiara Carella, Corporate Communications - Europe of Frost & Sullivan, +44-(0)-20-7343-8314, mobile, +44-(0)-753-3017689, chiara.carella at frost.com ; Photo: https://www.newscom.com/cgi-bin/prnh/20081117/FSLOGO