Since 2009, lower fuel and energy prices created some tough uphill conditions for renewable energy. Despite these powerful headwinds renewable energy installations have increased over the last few years.
On the upside, the Latin American boom should continue to grow in 2012 led by countries like Brazil and Mexico, and new markets will emerge in countries like Kenya, South Africa and Mongolia.
However, the wider economic and political conditions are likely to worsen for renewable energy. One of the most difficult obstacles concerns the impact of the expiration of renewable energy subsidies in the US. Despite efforts from the solar industry, at the end of 2011 the Section 1603 Treasury Grants program came to an end. The wind industry faces a major obstacle with the expiration of the production tax credit (PTC), set for the end of this year.
Subsidies for renewable energy are being cut in the UK’s solar and wind energy sectors. US renewable energy subsidies expired at the end of 2011 and Germany is planning to massively cut the Feed-in-Tariffs (FiTs) as of 9 March, 2012. The issue of Japanese FiTs is expected to be addressed by spring.
In the EU, the Eurozone crisis may result in a European recession. If the Eurozone crisis is brought under control, then it will benefit renewable energy markets in 2012, especially offshore.
In China we are seeing evidence of a slowdown and many are calling for major economic reforms. Economic growth in India slowed at the end of 2011.
The hope and promise of the ‘Arab Spring’ has given way to a winter of discontent as regimes in the Arab world are in turmoil.
In 2012, talk of war with Iran and instability in oil rich regions are creating uncertainty and driving up the price of oil. While this may help to create price parity for renewables, it also creates even greater economic pressures on the fragile global economies of nations that are still struggling to emerge from recession.
Amidst all this political and economic uncertainty, global warming continues unabated. NOAA said all 11 years of the 21st century rank among the 13 warmest. And NASA noted 9 of the top 10 warmest years in its record have occurred since 2000.
The La Nina effect was the warmest on record in 2011 according to data from NOAA and NASA. The increasing probality of melting Greenland and Antarctic icecaps are creating real concerns about the future of the planet.
The string of warm years in the last decade is linked to rapidly increasing concentrations of greenhouse gases NASA said. “Higher temperatures today are largely sustained by increased atmospheric concentrations of greenhouse gases, especially carbon dioxide,” NASA wrote in a press release. As the world’s economies get stronger, energy demands will keep increasing and carbon emissions will keep rising.
The IEA’s chief economist has said that governments only have five years to avoid more than 2°C of global mean temperature rise.
These factors coalesce to create a troubling outlook. There is both an increased need for renewable energy and a decreased economic and political capacity to meet this need.
© 2012, Richard Matthews. All rights reserved.
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