World Energy Market Prospects 2012

Nicholas Newman 24 Oct 2011

A quick look at various aspects that make up the global power generation sector, including wind, solar, nuclear, hydro and coal power station prospects.

Despite the popularity of renewable technology, development of conventional power plants continues to grow a pace.

This year is likely to see the end of the feather bedding of renewables in many countries, due to budgetary constraints in numerous countries. Given these new market conditions both investors and operators are being faced with harder often politically unpopular choices to make in their investment strategies. This article gives an overview of the picture facing investors in various parts of the world.

Tough times ahead for renewables?

Renewables have been doing well in recent years. However, due to budgetary constraints in many countries, governments are cutting back on subsidies for the renewables' sector. Which means there are tough times ahead for wind, solar, geothermal and wave power schemes.

From my experience, renewables need to make greater strides before they no longer have to depend on government subsidises and other policies to distort the market in its favour. At present, more money is to be made in the companies servicing renewable installations than investing in them, so have a look at consultancies.

Why hydro has a future?

I think the hydro sector has great possibilities, which in Europe will mean upgrading generating capacity at hydro station dams along major rivers, such as the Danube. Similar potential exists in the United States to upgrade existing facilities in an environmentally friendly manner. However, the main obstacle is the anti-hydro ideology among some environmentalists in North America. In addition, new hydro power schemes both large and small are likely to be constructed in Russia, South-East Asia and South America in the next few years.

Wind prospects look good in the Arctic!

As for wind, I think the proposed North African Desertec scheme has its financial, market and political problems. I think a better bet for investors will be the so-called Arctec scheme proposed for the Northern Scandinavian coast, because of its more favourable business climate and ease of access to Northern European markets such as the Germany.

Why pulling the plug on nuclear means more coal and gas power stations?

However, just because Germany and Italy have said no to a new phase of nuclear does not mean, this is the end for atomic power in Europe, there are too many national, strategic, environmental and economic reasons for building new atomic plants.

In fact, both countries will continue to enjoy the benefits of nuclear power. They will be importing it from neighbouring countries, such as France, which have nuclear-power programs. In fact, many of the investors in such plants will include German and Italian power generating companies as partners.

Already, both the United Kingdom and France have announced a new phase of nuclear power station building. In addition, the pulling of the plug on atomic in those countries has seen power companies reactivate coal power stations, and Europe’s orders for coal have increased as a result. This will mean europe will find it harder to meet its carbon emmission targets.

However, various power generation companies have annouced plans for speeding up proposals to extend the life of existing plants and schemes for new gas and coal power plants. As the new gas plants come on stream, it has been estimated that by 2014, Europe will be seeking additional gas imports. One potential source is the Nordstream gas pipeline project linking Siberian gas fields with Germany via the Baltic Sea. It should be operational by 2012, just in time to give a boost to EU gas supplies as Europe's economy begins to recover.

A possible golden future for Australian renewables.

For investors in the energy sector, current trends are suggesting Australia is a great investment given its proximity to North Asian markets for its coal and gas exports. However, there has also been a recent change of fortune for the county’s renewables sector, due to the latest announcements made by Australia’s Prime Minister Julia Eileen Gillard to rig in favour of renewable power generators the country’s power market. See also Australian PM faces stiff opposition against her radical carbon polices!

As an energy expert, I expect to find the next few years very interesting!