How will the global crisis influence the renewable energy market?

In the second half of 2008, the global financial crisis has dominated the news media. What will be the effect of this crisis on the sustainable energy market? Will it bring this young market to a standstill, or will it bring about new opportunities? The following is an attempt to group the pessimistic and the optimistic arguments.

The influence will be negative, since flows of money are foiled

--> The crisis is negatively affecting the sustainable energy market in the short term, as financial conditions for renewable energy projects have become less favourable.

--> Renewable energy systems manufacturing plants will have a hard time financing their planned extensions of production capacity. This may lead to a capacity shortage once the market demand starts rising again, which may, in its turn, hamper any future market revival.

--> Perhaps a more fundamental question is who will have to pay the price premium that is still attached to electricity from renewable sources. Government incentives might come under pressure because budgeting priority goes to projects that have a more direct influence on the economy and employment, whereas companies might incline towards investments that have a more direct positive impact on their balance sheets.

The influence will be positive, since investing in sustainable energy it is the best investment in the future we can make

--> The European summit early this month confirmed that the EU will pursue its climate mitigation programmes and maintain its targets for 2020 in this regard.

--> In general, the financial and economic crisis might stimulate governments to invest in sustainable energy — as far as they are able. Times like these demand government investments that create employment and stimulate the economy in the short term, and that are sure to create value for the country in the medium term. The latter is certainly the case for renewable energy and energy saving projects, as they make the country less dependent on imported fuels.

--> For private companies it might also be the right time to invest in renewable energy systems and energy savings — if they have money to invest at all. Such investments might not always have the highest IRR, but the risk that is involved, is low. A lot may happen, but there will still be a need for large amounts of energy tomorrow.

--> The renewable energy market itself might also benefit from a slowdown in growth. One could hear a lot of signals in recent years that this market was growing too fast for its own good. Technology development could hardly keep up the fast pace the market demanded. This could have headed towards the dangerous situation in which technology would not have been able to keep its promises, with the risk of a complete market collapse due to lack of confidence.

Today, the renewable energy market is forced to slow down due to external circumstances which do not affect the confidence in the technology itself. This slowdown in growth might give everyone concerned the time required to more fully develop the technology (PV cells, energy storage systems, micro-grids, electric vehicles, ocean power, etc.) so that it is sufficiently mature by the time the economy recovers.

It is difficult to predict whether the optimists or the pessimists will prevail; we’ll have to wait and see.

What do you think about this subject? Feel free to answer with your own vision of sustainable energy and the financial crisis.