Increasing awareness of renewable energy and favorable government legislation such as the Directive on Renewable Energy Sources (RES) are expected to drive growth of the European renewable energy market, according to market research firm Frost & Sullivan. In a recently announced report, “European Renewable Energy Market — Investment Analysis and Growth Opportunities,” the firm says that this market earned 8.89 billion euros (US$11.63 billion) in 2005 and estimates it will reach 14.54 billion euros (US$19.02 billion) in 2010.
“The RES directive of September 2001 introduced different national targets for each member country of the European Union,” says Frost & Sullivan Financial Analyst Saranya Sundaram. “It established indicative targets for the consumption of electricity generated from renewable energy sources, with the overall EU target set at 22% in 2010.”
This government support is timely because the renewable energy market is at an important stage of development and requires continued support from consumers and investors, according to Frost & Sullivan. The firm also noted that the rising threat of global warming has enhanced interest in clean energy, prompting significant and rapid investment in alternative energy by big companies.
While strategizing for this market, energy companies will have to take into account several issues including huge initial capital outlay, development of new transmission and distribution lines, rising export demand and high prices of raw materials. In the solar energy segment, not only are the raw materials prohibitively priced, but they are also in short supplies.
“However, solar companies may overcome the shortage of raw materials by undertaking backward integration,” says Sundaram. “This tactic will help them become one of the fastest growing renewable energy sources in Europe for the next 20 years.”
Meanwhile, the wind energy segment is going strong, claiming 69.4% of the total renewable energy market in 2005, according to Frost & Sullivan. Companies in this segment have adopted restructuring programs to counter the slowdown in the installed capacity, and this move is expected to pay off by 2008. Furthermore, European wind energy companies are expected to increase sales to Asian countries in the future. The demand from these end users grew by around 40% in 2005, driven mainly by the rising energy requirements of China and India.