The renewable energy industry remains one of the most vibrant, fast-changing, and transformative sectors of the global economy. Technology improvements, cost declines, and the catalytic influence of new financing structures, have turned the sector into a driver of economic growth – both in the United States and around the world. Global clean energy investment, including renewable energy, totaled more than $329 billion in 2015. Because the cost of most renewable energy technologies continued its downward trend, the world’s investment supported an unprecedented deployment of new renewable energy projects despite the availability of extremely cheap fossil fuels.
There is a growing global consensus that the world must deal with the threat of climate change in part through the deployment of clean energy technologies. The conclusion of the international climate agreement in Paris in December 2015 has provided new momentum for countries to promote policy incentives for clean energy development, which should drive investment in almost all markets.
However, despite the widespread desire to deploy clean energy, most countries’ tendency to cheaply import fossil fuels pulls them in the opposite direction. Governments around the world must decide whether to incentivize a clean, sustainable growth path or whether to allow investments in traditional energy sources to continue or even increase. The choices they make will govern the industry through both the short and medium-term.
This Top Markets Report provides analysis on key trends, areas of opportunity, and important challenges that exporters need to know in order to compete effectively in foreign markets. It offers projections for potential exports in the 2016-2017 time frame, as well as eight country case studies from a variety of geographic regions (Brazil, Canada, Chile, China, India, Mexico, Japan, and South Africa) with more in-depth information.
The report, which builds on earlier versions published in 2014 and 2015, includes rankings of 74 different markets, as well as subsector-specific projections. This report provides useful context in which to view export opportunities in a changing world, offering commentary on how exporters can best leverage the trade policy and export promotion tools offered by the U.S. Government. The report is meant to provide context to global markets over the near-term, helping exporters compare international opportunities.
According to ITA’s projections, the 74 markets included in this report will install over 250 GW of new renewable energy capacity through 2017. To help meet this demand, the global import market in this sector is expected to reach $195 billion cumulatively in the 2016-2017 timeframe.
Based on the estimates in this report, China is expected to account for more than 40 percent of all capacity installations outside the United States over the next two years. Its renewable energy investment is expected to be split relatively evenly between solar, wind, and hydropower through 2017. Other key developers of new capacity will be Japan, India, Brazil, Turkey, and the European Union (particularly, Germany and the United Kingdom).
Export markets with the strongest potential, in the top level of the rankings, tended to have substantial opportunities across multiple subsectors (e.g., Canada, India, Mexico, Brazil, China, Chile, and Turkey). However a few markets had overwhelmingly strong prospects in particular subsectors, due to unique driving factors such as the popularity of solar in Japan and France, the coordinated exploitation of geothermal resources in Kenya, and abundance of wind farm projects in Uruguay.
Of the markets that exhibited a jump in their overall rankings compared to last year, the most notable were India, France, and Vietnam. One of the biggest disappointments in last year’s projection was Saudi Arabia, where ambitious plans for solar development are in limbo for the near term while the focus turns to natural gas for its clean energy needs.
Within the sector rankings, in addition to the aforementioned special cases, other noteworthy changes included:
- the emergence of India as an attractive market for solar as its new deployment goals far exceed its own manufacturing capacity;
- the downgrading of potential wind exports to China and hydro exports to Chile, reflecting the shrinking U.S. market shares; and
- the strengthening of Mexico as a serious contender in the geothermal sector, creating new project opportunities for U.S. suppliers.
The renewable energy sector is so reliant on policy that any policy changes – either positive or negative—will have an almost immediate impact on a market’s attractiveness. As a result, the rankings provided in this report could change substantially as new policies are announced. Political upheaval could also have an unforeseen negative impact in an otherwise promising export market. However, despite the significant changes in policy environments in the past year, only six countries dropped out of the top 30 rankings compared to last year, which indicates a stable yet growing industry.
Since 2014, the Renewable Energy Top Markets Report framework has emphasized market size (a country’s imports) and market share (percentage of imports from the United States) in considering renewable energy export opportunities. ITA continues to encourage exporters to develop market entry and market expansion strategies based on these two variables.
Unfortunately, U.S. exporters are relatively ill-positioned to benefit from rising demand globally. According to ITA’s projections, exporters will capture just 5.6 percent of the global import market through 2017. Although this is an improvement over last year’s projection of 3.2 percent, there are missed opportunities in certain key markets where renewable energy is growing rapidly enough to support substantial imports. In Japan, for example, where imports could account for two-thirds of all solar products deployed in the market, U.S. exporters are expected to capture just 2.6 percent.
The United States does – and should continue to – capture a significant piece of the import market in the Western Hemisphere. U.S. exports benefit from geographic proximity as well as a longstanding reputation for reliable, innovative products. In fact, the share of the import market captured by U.S. exporters in the region (North America, Central America, and South America) during this period will reach nearly 13 percent. Exports of renewable energy products to the Caribbean were not measurable in this report.
While opportunities can be found in most markets, the destination of U.S. renewable energy exports will continue to be highly concentrated. The top 4 export markets are expected to account for 50 percent of all exports in the sector through 2016, while the top 10 markets should support over three-quarters of all exports.
In addition to understanding the competitiveness landscape facing exporters in different markets, exporters should also appreciate the other market dynamics facing the sector. For example, the impact of low fossil fuel prices will cascade across the renewable energy sector – both in the United States and around the world. Put simply, reaching “grid parity” – long the dream of the clean energy industry – will be harder to achieve given lower coal and natural gas prices. And in markets that use imported oil to power diesel generators, distributed renewables may seem less attractive.
However, unlike the period around 2009, when low energy prices undermined global renewable energy investment, the fall in clean energy costs over the past few years should help the industry remain competitive. In fact, renewable energy is already cost competitive in some markets where policy-makers have implemented effective policies. One example is reverse power auctions, which are increasingly being used by governments allocating power purchasing agreements for a certain capacity of renewable energy. The auction process tends to encourage developers to propose the lowest price per unit of electricity. For technology suppliers, the reverse auction system provides a long pipeline of planned and approved projects.