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'Innovators must expand to developing world'
By SHARON UDASIN
24/11/2012
Market expert tells 'Post:' Israel right to update solar tariffs; subsidies becoming less relevant.
 
As the solar energy trend continues to expand around the world, the industry’s innovators and entrepreneurs will need the developing world as much as the developing world needs their technology, a market expert told The Jerusalem Post on Wednesday.

“The current situation that we’re facing for solar right now is a substantial overcapacity – almost twice as much capacity exists in the world as there is demand,” said Ethan Zindler, head of policy analysis at Bloomberg New Energy Finance.

Though not every solar production plant in the world is currently running at full capacity, if they were, the supply of solar equipment would be close to double the demand, he explained.

Zindler, who manages the analysis of global policy developments that impact renewable energy and energy efficiency, was scheduled to speak at the Eilat-Eilot Renewable Energy Conference next week but now will not be able to attend.

With the “astounding ramp-up” in solar equipment production in China, what is not necessarily good news for manufacturers has become great for those who may want to install such systems, according to Zindler.

Those in developing countries might best benefit from the cheapening of solar equipment, he explained. While nearly everyone in developed countries like the US or Israel are already connected to the national electricity grid, people in remote villages in Africa or Latin America often do not have access to electricity.

“When you do the economics of adding a solar system to your roof, you’re doing it in the context of – what is the cost of the power I would otherwise get from the grid?” Zindler said.

In villages without any power whatsoever, people who are considering adding electricity to their infrastructure must calculate the cost of establishing transmission systems to carry the electricity produced by coal, oil or natural gas plants to their homes. With solar apparatuses that can operate isolated from the grid, however, these types of assessments do not have to occur, he explained.

“[Solar] really does have a massive opportunity for bringing hundreds of millions of people electricity for the first time,” Zindler said.

With solar modules now costing less than half of what they did two years ago, the industry “has never been cheaper or more economically competitive than it is right now,” he stressed. “It has become much more reasonable than ever and this is obviously bodes well for a higher level of installations.”

Because of the significant decrease in expenses involved with installing solar energy production devices, governments across the globe are “rapidly approaching a point where subsidies are becoming less needed and less relevant,” and solar development is beginning to make economic sense on its own, Zindler explained. Solar plants also give countries a sense of financial energy security, as they know what they will be paying for electricity production over the next 10 to 20 years – due to set tariff rates.

While Zindler said that he and his team are not in the business of making policy recommendations – just analyses – he did stress how important it is to most countries to diversify their energy portfolios. He also noted that this year he has seen a much more heterogeneous market in terms of geographic distribution of energy sources.

“The demand is going to fall substantially in Germany and has already in Italy,” Zindler said, of two of the countries employing solar energy the most right now. “Essentially, you have an industry that has been growing its production capacity but needs new markets to enter.”

As Israel goes forward, Zindler said that the country is being wise in its policy proposals with regards to its own feed-in tariff.

Rather than relying on fixed values set to be implemented over time, the Israeli Public Utility Authority will be determining its feed-in tariffs by pegging the tariff rates against inflation, exchange rate and currency parameters, as well as by employing the Bloomberg New Energy Finance index for solar equipment costs, Zindler explained.

This method – regardless of whether the index used was from his firm or another’s – will allow officials to be “very much in touch with real world market conditions” and to integrate them seamlessly into a simple formula, he said.

Following such meticulous, real-time updated trends will allow Israel to avoid being too generous with their rates and thereby avoid financial crises in the industry that Germany, Italy and Spain have experienced, he explained.

“There has been a history where have countries have overpaid for solar,” Zindler said.

Meanwhile, the International Energy Agency (IEA) has just launched the 2012 edition of its World Energy Outlook, predicting a steady growth of renewable energy adoption but also noting a continued heavy reliance on fossil fuels.

Looking at energy trends globally through the year 2035, the report finds that there will, in fact, be a pronounced shift away from oil, coal and in some cases nuclear power toward natural gas and renewables. That being said, fossil fuels will still remain the most prevalent source of energy internationally, with coal specifically remaining “the leading global fuel for power generation,” according to the IEA report.

While coal might remain dominant, the outlook suggests that renewables will also “take their place in the sun,” and by 2035 should account for almost onethird of total electricity output in the world. By 2015, renewables should become the second-largest source of power generation – about half of coal’s generation – and by 2035, they should “approach coals as the primary source of global electricity,” according to the World Energy Outlook.

“The rapid increase in renewable energy is underpinned by falling technology costs, rising fossil-fuel prices and carbon pricing, but mainly by continued subsidies,” the report’s executive summary said.

“Subsidy measures to support new renewable energy projects need to be adjusted over time as capacity increases and as the costs of renewable technologies fall, to avoid excessive burdens on governments and consumers.”
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