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Will Renewable Energy in Europe Need a Bailout?

| Thursday July 30th, 2009 | 0 Comments

money-in-the-windUndoubtedly, switching to renewable energy is a priority for many countries. But making the switch isn’t easy, even for developed nations. According to an Environmental Leader report, all of Europe is struggling to keep its wind and solar markets afloat, much less make them prosperous. Is a bailout an order?

Falling prices, decreased demand, and the credit crunch are to blame, the report says. Key players in the renewable energy market are faced with touch choices: possibly shifting production of solar modules to Asia, and accepting giant wind energy-funding loans from the UK. Not what Europe had in mind when it launched solar and wind energy programs, no doubt.

Shifting solar cell production to Asia would, analysts believe, combat the rapid decrease in prices and market shares in the solar sector, while allowing Europe to compete with more-successful Asian competitors. Asian companies have voluntarily lowered their prices to steal market shares, while European solar cell and module production companies have a product surplus (which has forced their selling prices down). China, in particular, poses a significant challenge to the European solar market. Last year, China accounted for approximately 33 percent of global solar cell production, while Europe’s share declined to 25.6 percent. Moreover, last week, China unveiled an incentive program that will, by providing 50 percent subsidies for investment in solar power projects, further reduce China’s production costs (which are already the lowest in the world).

Meanwhile, accepting loans may be Europe’s most viable option for improving its wind energy industry, which suffers from a lack of funding. (The Guardian reports that this lack of cash stems, in part, from Conservative party councils’ blocking of three times more wind farms than they approve.) Case in point: the UK’s only major wind turbine source, Vestas, has threatened to close its manufacturing plant on the Isle of Wight because of the weakness of the domestic market. The UK is expected to kick start 1 gigawatt of onshore wind plans (stalled, currently, by the credit crunch) with a £1 billion ($1.6 billion) loan. The European Investment Bank, too, is loaning an additional £4 billion ($6.6 billion) to support UK energy projects.

Environmentalists and policy institutes are reportedly urging the government to utilize state equity stakes in banks (gained in last autumn’s bailout) to fund sustainability projects.


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Categorized: Renewable Energy|

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