Challenges for the European renewables industry amidst worldwide competition

1. Tr a n s f o r m t o t h e p o w e r o f d i g i t a l
Cleantech Tracker 2011-2012 – 3rd edition
Challenges for the European renewables industry
amidst worldwide competition

3. Table of Contents
Editorial by Alain Chardon 04
Cleantechs are now a fully-fledged industry engaged 06
in worldwide competition
••Key metrics (global installed capacity and investments, 06
generation costs and number of competitors) show that solar
PV and wind energy are now mainstream industries
••Developing countries are catching up to the pioneer cleantech 09
markets (Europe and the US)
Wind: a global competition with regional supply chains 10
where Asian competitors are starting to emerge
••Onshore wind: a mature technology in a large size market 10
••Offshore wind: the next frontier 12
Solar PV: an overheated market in 2008-2010 which should 14
stabilize in the short term before grid parity takes over
The next blockbuster cleantechs: their development 16
could be hampered by the economic crisis and the lack of
political momentum
Key challenges ahead: innovation, operational 18
excellence, smart grid integration
••European players are more than ever engaged in an innovation 18
race – which requires not only internal competition,
but also cooperation
••The European players need more than ever to look for 18
operational performance
••Solving the smart grid challenges is key to the success 19
of the European cleantech industry
Conclusion 19
Cleantech Tracker 2011-2012 – 3rd edition 3

4. Editorial by Alain Chardon
2005-2010 was Cleantechs, especially renewable technological maturity and expected
characterized by a faster energies, are a key provider of breakthroughs;
sustainable jobs in Europe, with n Manufacturing & industry: global
development pace. Growth
already over a million “green jobs” rankings and perspectives at a
rates were particularly at the end of 2011. 2012 may be at global level;
high for onshore wind and crossroads with on the one hand, the n Utilities and consumers’ view: cost
solar photovoltaic (PV) potential for additional job creation components and regulatory drivers.
by 20201 and, on the other, the
with 27% and 49% CAGR
European financial crisis and While the preceding decade, 1995-
worldwide, respectively its impacts. 2005 was characterized by relatively
slow development (8-9% CAGR in
Renewable energies But cleantech markets are not just terms of global renewable generation4),
are now a mainstream European or national markets. 2005-2010 was characterized by a
Utilities and Manufacturers are now faster development pace. Growth rates
electricity generation
playing in the global market. That were particularly high for onshore
industry. is why, in order to complement wind and solar photovoltaic (PV) with
our work on the renewable energy 27% and 49% CAGR worldwide,
markets published every year since respectively5. Some technologies have
20062, we launched a new annual reached a commercial and industrial
study called Cleantech tracker in stage characterized by a high level
2009. This study aims to monitor the of technological maturity, fair costs
development of renewable energies of production, installation and
as well as new energy technologies maintenance. Renewable energies are
on a global scale. Our definition now a mainstream electricity generation
of cleantechs includes renewable industry. The global cleantech market
energies (e.g. solar, wind, marine, proved to be resilient during the
biomass, etc.) and technologies that 2008-2009 financial and economic
may enable saving, producing or crisis (+0.4% in 2009 on 2008 for
distributing greener energy (e.g. global new investment in renewable
energy storage, carbon capture and energy and +32% in 2010 on 20096).
storage, etc.). To make it easier And while the pioneer markets were
to compare, we chose to focus Europe and the US, Asian countries,
exclusively on technologies that led by China (+29 GW of grid-
produce electricity, consequently, connected renewable capacity in 2010
the production of heat is out of our and the leading market in terms of
scope3. Our approach mixes different global investments since 20097) are
types of analyses and viewpoints: developing quickly and have ambitious
plans (China targets 200 GW of
n Markets and technologies: onshore wind capacity by 2020 to
installed capacity and potential generate 440 TWh of electricity
development, levels of R&D, annually8). Not only has China become
650,000 additional jobs compared to a business-as-usual scenario according to the European Commission
1
In Capgemini’s European Energy Markets Observatory (EEMO), an annual report that tracks the progress in establishing an open and competitive
2
electricity and gas market in EU-27
(+ Norway and Switzerland) as well as the progress on the EU Climate-Energy package objectives
3
We fully acknowledge that renewable thermal energy is as strategically important – if not more – as renewable electricity. Yet heat markets are
highly fragmented and therefore difficult to study
4

5. a leading installer of renewable
energy, but also its Manufacturers have
surpassed those of Western companies
with, for example, Sinovel receiving
first place in 2010 for being the top
solar PV Manufacturer.
What factor will most influence the
European players – the European
crisis or the worldwide renewable
market growth? In both cases, it
is no longer about the market size
but rather about winning the three
industrial challenges listed below:
1. Innovation: for European players,
how to grab new markets wherever
in the world, to position in the top
leading vendors and operators and
to compete successfully against
international players
2. Operational excellence: how
to streamline the whole chain
from purchasing, manufacturing,
installation to operation and
maintenance (O&M) to gain
cost efficiency while improving
operational performance and
innovation capability
3. Smart grids: how to manage an
efficient integration of renewable
energy into the grid and what
transformations in terms of market
design should be implemented
In this paper, we will provide a
summary of our Cleantech tracker
study as well as provide some clues
relating to these crucial questions.
We wish you an enjoyable read.
4
Hydro excluded
5
Renewables 2011 Global Status Report – REN21, August 2011
6
Global trends in renewable energy investment 2011, UNEP – Bloomberg New Energy Finance, July 2011
7
Renewables 2011 Global Status Report – REN21, August 2011
8
Country profile China – GWEC, 2011
Cleantech Tracker 2011-2012 – 3rd edition 5

6. Cleantechs are now a fully-fledged industry engaged in
worldwide competition
Key metrics (global industry players envisage the Costs of renewable energies
installed capacity and “green market” as a bubble. have decreased, competing
investments, generation However, these investments sometimes with fossil fuel and
weathered the 2008-2009 financial nuclear generation costs
costs and number of crisis remarkably well, which
competitors) show that demonstrates, if need be, that Drop in raw material prices,
solar PV and wind energy renewable energy is a mainstream technological improvements and
are now mainstream industry. In 2009, globally, new manufacturing on a larger scale have
industries investments in large hydro and pushed costs of some renewable
other renewable energies even energies down. In particular,
Renewable energy (hydro surpassed new investments in onshore wind costs (long run
excluded) accounted for almost fossil fuel capacities. It is also generation costs between €42 and
a third of the estimated 194 GW worth noting that the 2008-2009 €80/MWh) are now close to fossil
of new electricity capacity added financial crisis was a turning point fuel (€48/MWh to €76/MWh) and
globally in 20109 in the geographical polarization nuclear generation (€34/MWh to
of investments. Prior to the crisis, €62/MWh) costs13.
Installation of new renewable Europe and the US attracted the
energy capacities progressed on majority of investments (mainly in Solar PV still remains the most
almost all fronts in 2010, with wind projects); during the crisis, expensive renewable energy even
wind and solar energy having emerging countries, in particular if costs of modules have dropped
almost met or surpassed the Brazil and China, took over the by 80% in only eight years. In
most optimistic short-term yearly US and Europe and lately, China certain sun-rich regions of the
forecasts (onshore wind: 38.3 GW confirmed its position of top world with high electricity prices,
realized vs. 40.8 GW forecasted10 investor. In 2011, however, the US grid parity is reached or very nearly
or solar PV: 16.6 GW realized vs. moved back ahead of China12. reached. Experts expect that due to
10.1 GW forecasted11). China alone
developed huge onshore wind
capacities, representing 50% of the
world’s newly installed capacity Table 1 – Generation capacities added in 2010 in EU-27
in 2010 (vs. 36% in 2009). In
Europe, 2011 and 2010 have been MW
25,000
outstanding years for solar PV
18,000
installations (especially roof-top), Installed
20,000
which come second after gas in Decommissioned
13,246
terms of new installed capacities
15,000
(see Table 1).
9,295
10,000
Investments have increased
4,056
more than six-fold between
5,000
2004 and 2010, reaching
573
405
208
200
149
145
25
25
US$260 billion in 2011
-
-45
-26
-107
-245
-535
-1,550
From 2004 to 2008, global new
-5,000
investments in renewable energy
s
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ar
at
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te
s
al
ro
Fu e
o
d
l
al
as
CS
Ga
oi
rP
dr
av
in
Pe
le
Co
showed outstanding growth rates:
as
yd
rm
om
W
el
hy
uc
w
la
W
lh
he
So
l&
N
Bi
e
al
almost 50% on average even
rg
ot
da
Sm
La
Ge
Ti
though the evolution was different
from one type of renewable to Source: Market outlook for photovoltaics until 2015, EPIA – April 2011
the other (see Table 2), making
6

7. further technological progress and the Table 2 – Year-on-year evolution of global new investments per type of renewable
continuous increase in electricity retail
prices, grid parity will be a reality for all
2008 2009 2010
European countries by 2020.
Wind 23% 16% 30%
Moreover, wind and solar PV
capacities now significantly impact Solar 55% 4% 52%
the marginal price of electricity in Biomass -11% 14% -4%
organized markets. Their marginal
costs being close to €0/MWh, Biofuels -7% -63% -20%
when these capacities produce a
Small hydro 16% -29% -22%
substantial amount of electricity,
the most inefficient and expensive Geothermal -16% -13% 43%
fossil marginal plants are not
run which therefore lowers the Marine -75% 100% -50%
spot marginal cost of electricity .
Total 23% 0% 32%
This was illustrated in July 2010
in Germany: the sunny weather Source: Global trends in renewable energy investments 2011, UNEP,
led the 10 GW of solar capacity Bloomberg New Energy Finance – July 2011 / Capgemini Consulting analysis
to produce a high output of
electricity14. This lowered the spot
prices which benefited buyers, but strategy towards renewable energies Renovables) being reintegrated by
decreased the margin of the hydro after the German government’s the mother company. Even oil majors
peak generators in neighboring decision to phase out nuclear (Petrobras, BP, Total) are selectively
countries (who usually make their energy, Areva, GE, etc). On the investing in cleantechs. Tender
profits during the summer). operators’ side, the same can processes for significant projects such
be observed with specialized or as the offshore wind tenders in the
Renewable Manufacturers and early adopters operators (Spanish North Sea and France, attract all of
operators as well as diversified Fotosolar, Iberdrola, Acciona, these players who, for submitting
Manufacturers and Utilities are French Compagnie du Vent) now their bids, get organized into
battling over market shares on followed or bought by larger consortiums gathering specialized
the cleantech market Utilities (EDF GDF SUEZ, E.ON,
, companies in design, development,
Enel, EDP or RWE Innogy) who construction and operation of
Renewable Manufacturers (German all have ambitious plans to further renewable energy projects, turbine
Q-Cells or Enercon, Danish Vestas, develop their renewable energy manufacturers, engineering and
Spanish Gamesa, etc.) have first capacities. It is worth noting that construction companies, power
emerged on the market and have the last few years have seen many of cables manufacturers and installers
been followed by large and long- the independent players absorbed for a market of 140 GW, which is
standing Manufacturers (Siemens by large Utilities or renewables estimated to be between €400 and
who has recently revisited its subsidiaries (EDF EN, Iberdrola €500 billion by 2030.
9
Renewables 2011 Global Status Report, August 2011 – REN21
10
Global Wind report 2010, 2nd ed., April 2011 and Global Wind report 2009, April 2010 – GWEC
11
Market Outlook for Photovoltaics until 2015, March 2011 and Market Outlook for Photovoltaics until 2014, May 2010 – EPIA
12
Global investment in clean energy, January 2012 – Bloomberg New Energy Finance
13
Refer to the 13th edition of Capgemini’s European Energy Markets Observatory
14
From €4 to €6/MWh according to a German research institute (IZES), i.e. a price decrease for large industrials between €520 and €840 million in
Germany in 2011
Cleantech Tracker 2011-2012 – 3rd edition 7

8. Table 3 – Annual new financial investments in renewable energies worldwide and per region
New financial investments (US$ bn) Capacity added (GW)
excluding Corporate and Government R&D, excluding biofuels and small hydro
including distributed solar PV
240 80
202 65
200 Other* Other**
153 153 60
160 Biofuels 50 Biomass
World 120 Biomass 40 36 Solar
Solar Wind
80
Wind 20
40
0 0
2008 2009 2010 2008 2009 2010
100 50
81
80 40
63 66
Other 30 28 Other
60
EU-27 40
Solar
20 18 Biomass
Wind 14
Solar
20 10
Wind
0 0
2008 2009 2010 2008 2009 2010
100 50
80 40
Other
North 60
Solar
30 Other
America 40 34 35
Wind 20
12
Biomass
22 9 8 Solar
20 10
0 0 Wind
2008 2009 2010 2008 2009 2010
100 50
80 40
65
60 Other 30 27
Asia & 36
49
Solar 17
Other
40 20 Biomass
Oceania 20 Wind 10
9 Solar
Wind
0 0
2008 2009 2010 2008 2009 2010
100 50
80 40 Other
60 Other 30 Biomass
Rest of World 40 Solar
Middle East, Africa and 20 Solar
20 22 Wind
South America 20 16 10
2 Wind
0 2
0 0
2008 2009 2010 2008 2009 2010
Note: *Other: small hydro, geothermal, marine; **Other: Geothermal, marine
Source: Global trends in renewable energy investments 2011, UNEP, Bloomberg New Energy Finance – July 2011 / Capgemini Consulting analysis
8

9. Developing countries are Asian Manufacturers are now and panels are massively imported
catching up to the pioneer taking the lead over their to it from Asia. Asian players have
cleantech markets (Europe European peers, which have managed to establish large companies
been pioneers and industry which produce at low prices. As
and the US) leaders for the last two decades Asia now represents a major (and
growing) share of the global onshore
From a geographical
On the manufacturing front, there is wind market, there is a trend for
standpoint, the potential for
a clear shift in production from the installing local/regional production
development has shifted from
Western countries to Asia. Historical sites in this region, for both Western
Western Europe and the US to
European leaders now face a new and Asian Manufacturers, in order
Central Eastern Europe and the
and fierce competition from Chinese to reduce shipping costs. The cards
BRICs
(and also Korean) players, for both are reshuffled both in the wind and
Mirroring the investments’ trend, solar PV cells and modules and solar PV industries: there are some
the potential for development of onshore wind turbines. Furthermore, bankruptcies (Solon in Germany,
renewable energies projects is now most European and American Photowatt in France), companies
mainly located in areas presenting Manufacturers are progressively in difficulty (Danish Vestas or
high economic growth perspectives, developing production capacities out German Q-cells, which are laying
favorable governmental support of their home countries in order to off employees), Western companies
and the need for competencies. The reduce costs and address new markets investing in Asia (Gamesa conquering
situation in Europe has evolved efficiently. Manufacturing solar PV the Indian wind market), Asian
unfavorably, with an expected has clearly become a global market. Manufacturers receiving the top rank
slowdown in capacity added and As Europe is the lion share of the (JA Solar gaining four ranks in only
investments, and weaker economic global solar PV market (80%), cells one year).
perspectives for the coming years.
The playing field has thus become
international and many players
have well understood this shift as
reflected in their strategy:
n Global wind Manufacturers shift
their investment focus from Europe
to the USA and China,
n Enel wants to pursue its
growth in renewable energies
in Latin America, Russia and
Eastern Europe,
n GDF Suez or EDF are competing
in their home market, both
candidates for the offshore wind
projects in France, but eye also
foreign markets,
n Iberdrola continues its development
in Latin America and in renewable
energies (investments for the
period 2010-12 amounted to
€5.3 billion, e.g. one-third of its
whole investment program).
Cleantech Tracker 2011-2012 – 3rd edition 9

10. Wind: a global competition with regional supply chains
where Asian competitors are starting to emerge
Onshore wind: a mature Europe (for example Poland plans supporting the deployment of wind
technology in a large 3,350 MW by 2015 and 5,600 MW energy which is reflected by the
size market by 2020 and Romania has currently increased number of projects under
2,624 MW of capacity covered by construction (over 100 projects for
On a global scale, on-track with connection contracts15 ). 8,300 MW).
aggressive targets
In the US, onshore wind installations Contrary to Europe and the US,
The aggressive targets established slowed down in 2010 after two China has been booming in the last
by the Global Wind Energy Council record years, due to the improved few years (with a cumulative onshore
(GWEC) for 2010 have almost been profitability of gas-fired plants and a wind installed capacity doubling
met despite the economic crisis, with lack of long-term investor confidence every year between 2006 and 2009
38.3 GW of capacity added globally (vs. with unpredictable federal policies and a record level of investment of
a forecast of 40.8 GW) and 197 GW (no Production Tax Credit extension US$20 billion in 200916 ). This trend
of cumulative installed capacity (vs. expected and no Federal Renewable was reinforced in 2010, with 50% of
a forecast of 200 GW). Long-term Energy Standard). However, 2011 global capacity added in 2010 (vs.
forecasts announced in May 2011 are ended better than 2010 in terms 36% in 2009). As a result, China
lower than those of 2009, but remain of installations (6,810 MW vs. now has a cumulative capacity of
very high, with cumulative installed 5,116 MW) as new generation 42 GW, higher than that of the US
capacity expected to double by 2014 wind electricity costs progressively and half of that of the EU-27. The
(388 GW, instead of 409 GW became affordable. In addition, country plans to continue this same
targeted in 2009 forecasts). the State governments have been trend in 2012.
Europe leading the way, though
less dynamically, the US with Table 4 – Annual onshore wind capacity sold per manufacturer
ups-and-downs and China
catching-up rapidly MW
7,000
Europe (EU-27) has remained the
biggest installer of onshore wind, 6,000
with 84 GW of cumulative installed
capacity in 2010. This position is due 5,000
to pioneer countries such as Germany
4,386 Sinovel
and the Nordics that have developed 4,000
4,057 Vestas
3,783
capacities since the early 1990s. 3,743 GE
Goldwind
They have been caught up recently Enercon
3,000 3,000
by massive adopters in Southern 2,900
2,640
Siemens
Dongfang
Europe such as Spain. These are 2,450 Gamesa
now mature markets with stabilized 2,000 Guodian United Power
1,655 Suzlon
yearly growth compared to the past 1,460 MingYang
1,182
decade (around 10 additional GW 1,000 909 Nordex
788 REpower
per year in Europe in the past three
years). The best sites have been taken - Note: Dotted lines for
and projects often encounter public 2007 2008 2009 2010 Asian players and plain
lines for Western players
opposition. The new growth area for
onshore wind in EU-27 is Eastern Source: Companies’ annual reports and websites, Eur’Observer, BTM Consult /
Capgemini Consulting consolidation
15
Wind Barometer – Eur’Observer, February 2011
16
Country profile China referring to UNEP/Bloomberg analysis – GWEC, 2011
10

11. China emerging as a major presence in growing markets, European Manufacturers tried to
manufacturing base for onshore companies rebalance their workforce adapt to the changing market focus
wind turbines geographically (Vestas closed four towards China and Eastern Europe:
factories in Denmark and one in Gamesa is investing heavily in China
China has become a major onshore Sweden in 2010 and shifted part of and India and RePower signed
wind turbines manufacturing its production to Asia). Other top contracts in Turkey and Bulgaria18.
country, with four Chinese
companies in the Top 10
(see Table 4). American (GE) and
European Manufacturers (Vestas,
Enercon, Gamesa) are strongly
challenged by Sinovel, Goldwin,
Dongfang and United Power.
They benefit from a booming
domestic market and manage to
provide turbines of fair quality
and prices. The growth of China’s
wind energy sector is supported
by the government’s commitment
through implementation of national
renewable energy policies and
roll out of well-defined medium
and long term development plans.
Since 2008, due to a short supply
of wind turbines, a new breed of
Manufacturers emerged in the
market creating an oversupply in
2010 and making the market price
extremely competitive. India also
appears as a promising market, with
initiatives pushed by the
Indian government17 .
Western players adapting to a
changing industrial landscape
In a move to adapt to the changing
manufacturing environment,
Western companies such as Vestas
align their business strategy to focus
more on markets like China and
the US due to the sluggish pace of
development in mature European
markets. As a step to maintain cost
competitiveness and to increase
17
Third quarter results 2011 and the years to come – Vestas, November 2011
18
Renewables 2011 Global Status Report – REN21, August 2011
Cleantech Tracker 2011-2012 – 3rd edition 11

12. Offshore wind has a lot Offshore wind: the onshore wind projects, favorable
of advantages in the next frontier natural conditions and strong
competencies from wind turbine
European context, with a
Until now, Europe remains Manufacturers and Oil & Gas
higher social acceptance offshore platforms operators. The
the only continent with
than for onshore wind significant offshore wind trend for bigger and bigger wind
projects, favorable natural installed capacities turbines and more concentrated
wind farms could allow bigger
conditions and strong
The European cumulative economies of scale than for
competencies from wind installed capacities stands at onshore wind in the future,
turbine Manufacturers 3.8 GW installed vs. 84 GW bridging the current cost gap.
and Oil & Gas offshore for onshore wind. Historically,
the UK and Denmark have been Injecting electricity within the
platforms operators.
pioneer countries, with installed grid from offshore wind will also
The trend for bigger and capacities of 1.3 GW and 0.9 GW, be easier than from onshore wind
bigger wind turbines respectively, in 2010. The UK is electricity, as it is more predictable
and more concentrated changing scale with new projects and has steadier regimes through
in the North Sea, amounting to day/night periods and winter/
wind farms could allow
33 GW planned as part of its summer seasons.
bigger economies of scale “Round 3 expansion”. Other
than for onshore wind in European countries also have large Will major offshore wind
the future, bridging the plans to develop offshore wind projects emerge in the rest
capacities in the North Sea, the of the world?
current cost gap.
Netherlands and Germany, and more
recently in France (see Table 5). Offshore wind projects, outside
of Europe, depend on the success
Higher costs, but nice of flagship projects. Shanghai
perspectives and higher Donghai (East Sea) Bridge project
social acceptance is currently the only offshore wind
farm outside Europe. Four other
Today, offshore wind remains projects have also been launched
costly, with an average long run by China and may be completed
generation cost of €100-170/MWh by 2014. China’s offshore wind
(vs. €42-80/MWh for onshore potential is estimated to be the
wind). Actually, installing wind equivalent of the North Sea’s.
turbines in sea areas requires Some analysts predict a strong
additional investments to assess development in China by the end
the geological constraints and of the decade, with an installed
to evaluate the environmental capacity of 30 GW by 202019 (the
risks as well as higher O&M official target set by the Chinese
costs. Still, offshore wind authorities). North America is also
has a lot of advantages in the developing pilot projects: Cape
European context, with a higher Wind (US, 468 MW) and Nai Kun
social acceptance than for (Canada, 1,750 MW).
19
Offshore Wind Power report – Pike, October 2011
20
The Worldwatch Institute’s Climate and Energy Blog, August 2011
12

13. A first-mover advantage for domestic markets. With no doubt, Still, Chinese Manufacturers have
European Manufacturers the US and European players started developing prototypes of a
have a competitive advantage on large-size (5-6 MW) offshore wind
Today, European wind turbine advanced/complex technologies turbines: XEMC, Sinovel, Goldwind
Manufacturers benefit from a and components that remain core and Guodian United Power, to be
first-mover advantage on their elements for offshore wind turbines. launched in early 201220.
Table 5 – Existing and future offshore wind capacity (MW)
UK DK NO SE FI
1,586 854 2 164 26
48,596 2,472 11,394 8,279 4,293
IE EE
25 0
NO FI
3,780 1,000
SE
FR
0 EE LV
0
DK LV
6,000 200
IE
LT
UK
NL
ES PL
0 0
DE PL
BE
6,804 900
LU
CZ
SK
FR DE
PT AT 195
CH
0 HU
SI 31,246
478 RO
ES
IT BG
PT
GR
0
4,889
GR
Capacity as of June 2011
BE NL IT
195 247 0
2
11,394 1,857 5,992 2,700
Capacity in 2030
Source: EWEA / Capgemini Consulting consolidation
Cleantech Tracker 2011-2012 – 3rd edition 13

14. Solar PV: an overheated market in 2008-2010 which should
stabilize in the short term before grid parity takes over
Too much success kills success, A progressive increase in the
costly national feed-in-tariff US, benefiting from sun-rich
schemes revised down regions
Solar PV has experienced by far The situation is less gloomy in the
the largest increase in global US, with solar PV installations that
installed capacity due to favorable have progressively increased in the
support schemes implemented by past few years, thanks to federal
governments over the last four years schemes (declined at a State-level)
and the dramatic drop in the costs of production tax credit (PTC),
of modules from 2009 onwards. investment tax credit (ITC), the
In 2010 and 2011, the bulk of this treasury grant program (TGP)
rapid and unexpected growth along with the economic stimulus
came from Western Europe, mostly package. Additionally, the high
Germany and Italy (both countries solar radiation coupled with the
accounted for nearly 60% of global high electricity prices in States
market growth in 2011). However, like California is expected to make
this growth proved to be very solar PV quickly competitive. The
costly for countries’ budgets driving shift in projects from Concentrating
several European Member States Solar Power (CSP) to solar PV also
(Germany, Italy, Spain, France, stimulated the market.
Czech Republic and the UK) to
reduce their subsidies strongly to Chinese Manufacturers now
the solar PV industry which led to a leading the world market and
market downturn. Globally, capacity benefiting from a promising
of solar panels manufacturing is domestic market
now exceeding demand by 38%21,
after a record capacity addition of China has emerged as a leading
60% in 2011. manufacturer by taking the Top 2
Table 6 – Annual solar PV capacity sold per manufacturer
MW
1,600
1,507 Suntech
1,460 JA Solar
1,400 1,412 First Solar
Yingli
Trina Solar
Q Cells
1,200 Motech Solar
1,064 Sharp
1,014 Gintech
1,000 945 Kyocera
910 SunPower
827 Canadian Solar
800 Hanwah Solar
Neo Solar Power
650 REC
600 584 Solar World
522
500 Sun Earth Solar Note: Dotted lines for Asian
451 E-TON Solartech
420 players and plain lines for
400 405 Sanyo Electric
Western players
347 China Sunergy
Source: Companies’ annual
200 reports and websites,
Eur’Observer, European
Commission / Capgemini
- Consulting consolidation
2007 2008 2009 2010
14

15. global positions in 2010 in terms of (China’s total installed capacity of n First Solar and SunPower have also
manufacturing capacity (see Table solar power reached almost 3 GW opened facilities in Malaysia.
6). European Manufacturers were by the end of 2011), increasing its
taken short and did not actually installed capacity three-fold. Grid parity is already a reality
benefit from the rapid growth in very sunny regions with high
of their home market, and the A trend for consolidation electricity prices
majority of solar PV panels were and a shift to Asia for
imported from China (China & Western Manufacturers When will grid parity happen? It is
Taiwan reached ca. 60% of global a matter of cost, insulation and the
production in 2010 compared to As a consequence of increased level of local end-user electricity
19% in 2006). Suntech, JA Solar, supply in the global market, the prices. The European Photovoltaic
Yingli and Trina Solar more than trend towards sector consolidation Industry Association (EPIA)
doubled the capacity supplied in through M&As and the move of estimates that grid parity is already
2010 compared to 2009. China’s a manufacturing base to Asia is a reality in sunny regions such as
aggressive move to become a global evident. For example: Los Angeles or Dubai and that grid
manufacturing hub is witnessed by parity may be generalized in Europe
its increased capacity and reduced n Q-Cells, German manufacturer by 2020 to less sunny regions such
module price. Factory gate prices of crystalline silicon cells, almost as Berlin 23 (see Table 7). Solar PV
were down 33% year-on-year in doubled its production and moved may even be already at grid parity
early 2011 and are expected to about 50% of the production to its in the sunniest regions of Italy
fall further should the supply new factory in Malaysia between (Sicilia or Sardinia) since Italian
and demand imbalance continue. 2009 and 2010; residential electricity prices are
The Chinese Manufacturers have n The Norwegian manufacturer REC amongst the highest in Europe.
managed to attain low prices closed three factories in Norway
due to many reasons, including and opened one in Singapore;
advantageous loans from Chinese
State-owned banks.
Table 7 – Solar PV grid parity per customer segment in selected European countries
China is also planning to install
solar PV capacities on its own FR DE IT ES UK
land: the country launched the Residential 3 kW 2016 2017 2015 2017 2019
“Golden Sun” program in 2009
Commercial 100 kW 2018 2017 2013 2014 2017
(providing subsidies to solar PV
power generation projects)22 and is Industrial 500 kW 2019 2019 2014 2017 2019
now catching up with 2 GW of solar
Source: Solar PV – Competing in the energy sector, September 2011, EPIA
PV power installed capacity in 2011
According to the Norwegian manufacturer REC, cited in « Solaire : les acteurs européens luttent pour leur survie », Les Echos, November 15, 2011
21
22
China Golden Sun Programme (2009, revisited in 2011) – IEA, Policies
23
Solar PV: Competing in the energy sector – EPIA, September 2011
Cleantech Tracker 2011-2012 – 3rd edition 15

16. The next blockbuster cleantechs: their development could
be hampered by the economic crisis and the lack of political
momentum
The three main regions With major projects ahead, CSP implemented in the 1960s, none of
active in developing CSP could take off in the next three the other marine energy systems
to four years have been successful at a large scale
are the sunny US States
until now. However, as 75% of the
(California, Florida …), Today, CSP remains small in scale world’s surface is covered by oceans,
Spain and the Sahara compared to solar PV with only marine energy represents one of the
desert. 1.1 GW of installed capacity globally largest renewable energy sources.
and 2.6 GW of additional capacity The IEA estimates the ocean energy’s
planned to be operational by 201424. global potential to range between
20,000 and 90,000 TWh/year.
The three main regions active in Demonstration projects are under
developing CSP are the sunny US operation across Europe, North
States (California, Florida …), Spain America and Asia. More than 45
and the Sahara desert. The US was wave and tidal prototypes have been
a pioneer market for CSP in the tested in the ocean25. Governments’
2000s but recently has changed interest is rising in the UK, France
in that some planned projects and Portugal. In France, a national
have been converted into solar PV partnership initiative, Ipanema, was
projects over the last few months, created to promote the creation of
due to dramatic reductions in solar marine energies. The UK government
PV costs. Spain developed its CSP gives Utilities that buy electricity
capacities in 2009 and 2010 at a from projects such as SeaGen
very fast pace, taking the lead over double credit towards meeting
the US. The favorable feed-in-tariff their renewable energy targets.
scheme in Spain provided the Additionally, financial incentives are
regulatory push for technological available in the form of capital grants,
development, but this move is now exemption from the Climate Change
hampered by the financial crisis and levy and the opportunity to sell
fewer investments. The Sahara desert renewable obligation credits.
could be a promising area for the
development of CSP (Desertec project Biomass remains
in Morocco and Saudi Arabia, Masdar under-exploited
City…). Plans for CSP development
are also being considered in In 2010, global power biomass installed
Australia, China and India. capacity was 62 GW26, e.g. 1.5 times
the solar PV installed capacity. The
Marine energy is the next focus US and Brazil continue to lead the
of Utilities and Manufacturers power biomass segment, while Europe
focuses on ensuring the sustainable
Today, marine (or ocean) installed development of this source of energy.
energy capacities are still rather The biomass market for electricity
small. Besides the French tidal generation picks up slowly. Major
barrage of La Rance (240 MW) reasons stem from the fact that:
24
Renewables 2011 Global Status Report – REN21, August 2011
25
Emerging Energy Research – IHS, October 2010
26
Direct firing or co-firing (with coal or natural gas) of solid biomass, municipal organic waste, biogas, and liquid biofuels
16

17. n Sustainability benefits and social
acceptance are not always so easy
to establish;
n Arbitrating between producing
heat or electricity from biomass
is not always obvious neither at
the investment stage nor at the
operating stage for CHPs;
n It is a complex market and supply
chain with many stakeholders and
actors to align;
n Its development time is longer
than that for wind or solar PV
energy, for example.
Carbon Capture and
Storage (CCS) is still in a
demonstration phase
Although strongly pushed by the IEA
and all the stakeholders involved
in the low-carbon economy, CCS
is not taking off due to difficulties
to reach performing technologies
and too low carbon prices (short-
term certificate prices plunged from
€14/t on average, in 2010, to €7/t in
January 2012), while the long-term
perspective of a worldwide post-
Kyoto agreement on climate change
policies and higher global costs
for CO2 flies away. This explains
why there has not been noticeable
development over the last two years.
On the contrary, the hydro
storage is rejuvenating
The increasing share of intermittent
renewable energy sources coupled storage systems account for 2 GW. storage projects planned and under
with the volatility of electricity In order to support a growing construction as of May 2011 in
grids is also strengthening share of intermittent renewables, Europe. The leading countries
the need for additional energy a number of European countries are Switzerland, Portugal, Spain,
storage capacities. Pumped hydro are rediscovering pumped hydro; Austria and Germany. For instance,
is the only conventional and this trend has been reinforced in in Germany, new pumped storage
commercially mature grid scale countries that decided to reduce power stations have been added,
storage option with a capacity of national exposure to nuclear power bringing the total new capacity
136 GW worldwide at the end after the Fukushima events. In total in fast response technologies to
of 2010, while the other energy there are around 17 GW of pumped over 3 GW.
Cleantech Tracker 2011-2012 – 3rd edition 17

18. Key challenges ahead: innovation, operational excellence,
smart grid integration
European players are more than A key challenge for the European budget optimization that renewable
ever engaged in an innovation industry is to build “coopetition”, energies are cost-competitive, against
race – which requires not only i.e. internal competition but also conventional power generation, and
internal competition, but also cooperation between European to gain new markets abroad.
cooperation players. However, in a context of
crisis, projects opposing European This suggests, for example, that
The playing field is now global. This players and Member States can operations should be streamlined,
is a threat to the home market (as lead to value destruction making as Enel Green Power has done
on the solar PV market) but also this competition adversarial and by reviewing its global portfolio
an opportunity to position oneself counterproductive. Innovation needs management process to identify
in new markets and to gain market to be fostered by actively leveraging improvement opportunities and
shares (as the onshore and offshore the know-how and research to design new processes and
wind markets). To be competitive, capabilities not only of the established organization accordingly. Other
the European industry needs a European cleantech supply chain, Utilities are taking the same route:
strong domestic market to gain the but also of the other European hi- EDF has engaged in a transformation
operational, financial and innovation tech industries (spatial, aeronautic, program of its Generation and
momentum required to build its automotive, etc). Engineering Division to improve
international competitiveness. processes and better make us of
On the international front, European digital tools, E.ON is now organized
The latest developments on the operators explore new markets and into five global units amongst which
offshore wind markets reveal the entry strategies to gain market shares. are “managing generation fleet”,
competitive spirit in Europe. In the Obviously, the best target countries “renewables business” and “new
UK, France and other European are those combining significant build and technology” and Iberdrola
countries, governments, local ports GDP growth, a stable and favorable launched a program to improve
and public authorities are getting regulatory framework supporting the the efficiency of its operations, in
organized to attract OEM and to development of renewable energies particular its O&M operations. On
build the Tier 1 and Tier 2 supply and a favorable economic and legal the Manufacturers’ side, Vestas is
chains. All the elements are there to framework allowing the setting up of implementing a transformation plan
initiate the emergence of a powerful foreign companies. The organizational with shared services and a new
industry that would see order books structure of these companies should marketing & sales organization,
filled up, employment revitalized adapt to this international expansion with more focus on key accounts
and operators positioned on high making it mandatory to have and a cost reduction target of €150
technology products and services. clear commercial and partnership million in 2012.
Technical entry barriers to the strategies with efficient processes
international market of offshore and aligned management. European Manufacturers are
wind equipment and components are continuously focusing on quality
higher but international competition The European players need management and supply chain
should not be underestimated, more than ever to look for optimization, in order to compete
as Asian Manufacturers are also operational performance with low-cost Asian players. To
developing their own products. To maintain competitiveness and acquire
that end, transformation programs European Utilities and complementary know-how, major
launched by some European Manufacturers need to engage in the Western Manufacturers have also
Manufacturers are a move in the most efficient and performing way undergone structural consolidation
right direction to professionalize of manufacturing their products and acquired a series of smaller
their marketing & sales processes and piloting their services and companies in the last few years. As
and organizations, in order to operations. Improving the total cost an example, Vestas improved lost
boost international sales and of ownership from manufacturing to production factor from 4.5% in 2009-
provide comprehensive offerings service is now a must have, both to 2010 to ~2% in 2011, and GE Wind
to key accounts. demonstrate to governments seeking acquired Scanwind in 2009 and Wind
18

19. Systems Tour in February 2011. Yet €700 million in 2011. It has developed exceptional UK and German incidents
lessons should be learned, for instance, new offerings across the value chain of early December 2011 showed how
from the automotive industry. Too (“SiteHunt”, “SiteDesign”, “Electrical rough measures could be implemented.
much pressure on cost optimization PreDesign”, “Power Plant Controller”, High wind speed led to a high wind
and a simplistic way of addressing “VestasOnline Business – SCADA electricity production in both countries.
purchasing processes, led to a loss v.3.9”) and built partnerships with UK and German operators were asked
of long-term relationships between specialized companies (Caterpillar). to shut down their wind turbines.
players and to a destruction of the Now that the renewable installed fleets UK operators received a £1 million
innovative capacity. As mentioned have reached large sizes, much can compensation from the TSO, while
above, innovation capability both on be learned from benchmarks from Germany tapped into its Austrian
products and processes is a must have other decentralized industries such as reserve capacity.
to maintain an advantageous position automotive, air or rail services, etc.
within Europe and abroad. The smart grid technological and
Solving the smart grid market design developments should
In the onshore wind industry, challenges is key to the improve the grid efficiency and enable
developing O&M services is an integral success of the European better integration of intermittent
part of the strategies of European wind cleantech industry renewable energies through an array of
turbines Manufacturers, benefitting levers, ranked by increasing costs:
from a large installed base in Europe The share of renewable energies in the
and their long-lasting experience European electricity mix is increasing n Predictability of wind and sun
and knowledge. Today, Vestas clearly significantly. However, grids were not generation;
leads the global market in terms of designed to receive a high production n Industrial and commercial flexible
cumulative installed base, with 48 GW of intermittent electricity. To that demand response;
(~25% of existing cumulative capacity extent, experimentations are on their n Increased modulation of fossil power
in the world and a market share of new way in several countries around the plants;
added capacity of ~10% in 2010). Vestas world to design the processes and n Hydro storage;
proved to be pro-active and successful technical means (the so-called smart n Residential flexible demand response
in the field of services, since its “Service grids) to integrate renewable energies and;
business” now accounts for ~9-10% of in an efficient manner into the existing n Other physical and chemical storage
its total revenues and should amount to and future electricity grids. The technologies.
Conclusion
To conclude, markets are moving in all the value chain segments
quickly, segments have their own and can compete internationally
specificities, competition is fierce assuming that:
and European public support
is becoming more selective. Yet n They articulate cooperation with
renewable energies are here to stay competition;
for a long time, and opportunities n Drive innovation;
have to be seized in and outside n Develop the proper strategy;
Europe. European Utilities and n Implement it thoroughly;
Manufacturers have developed n Operate efficiently.
competencies, they are often present
Cleantech Tracker 2011-2012 – 3rd edition 19

20. About Capgemini
With around 120,000 people in 40 Capgemini Consulting is the global
countries, Capgemini is one of the world’s strategy and transformation consulting
foremost providers of consulting, organization of the Capgemini Group,
technology and outsourcing services. specializing in advising and supporting
The Group reported 2011 global revenues enterprises in significant trans-
of EUR 9.7 billion. Together with its formation, from innovative strategy to
clients, Capgemini creates and delivers execution and with an unstinting focus
business and technology solutions on results. With the new digital economy
that fit their needs and drive the results creating significant disruptions and
they want. A deeply multicultural opportunities, our global team of over
organization, Capgemini has developed 3,600 talented individuals work with
its own way of working, the Collaborative leading companies and governments to
Business ExperienceTM, and draws on master Digital Transformation, drawing
Rightshore®, its worldwide delivery model. on our understanding of the digital
economy and our leadership in business
Rightshore® is a trademark belonging to Capgemini transformation and organizational change.
Find out more at:
www.capgemini-consulting.com
Contacts
Alain Chardon
Principal - Industry, Services and Utilities
Director Cleantechs & Decarbonate Your Business
alain.chardon@capgemini.com
Warm acknowledgments to
Sopha Ang, Subhash Jha, Inderraj Gulati and Laurent Saïag.
Capgemini Consulting
Tour Europlaza - 20, avenue André Prothin 92927 La Défense Cedex
France
Tel. : +33 (0) 1 49 67 30 00
Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group