As technology improves the world grows smaller and as it does energy markets have become more intertwined than ever before.
Its no longer unusual for an American company to invest in Turkey or for a European company to manufacture in Asia. But even as globalization has opened opportunities for investors and entrepreneurs, it has added–at times this year–crippling pressures on sectors of the energy industry.
Solar Shakeout
When China began to heavily subsidize manufacturing of solar photovoltaic (PV) panels at the same time international appetite for the panels began to slow, Chinese “dumping” the panels into the American markets drove prices so low it became nearly impossible for American companies to compete.
While some companies, including Solyndra, have taken a hit, many American companies have welcomed the competition from China, which has dramatically reduced the price of individual panels and forced a solar shakeout that will leave only the best-financed and operationally strongest companies standing.
When one German solar manufacturer, SolarWorld, decided to take action against China by filing a complaint with the US government, a group of 25 American solar companies blocked the action and formed the Coalition for Affordable Solar Energy (CASE) to protect the open solar market and allow prices to drop.
“Global competition is making affordable solar energy a reality in America and around the world,” CASE wrote in a statement at the time.
Wind Wars
But global competition is also forcing industry consolidation in sectors other than solar. In the wind industry, global competition has forced the world’s largest wind turbine manufacturer, Vestas, to abandon its forecast of €15 billion in revenues for 2015 and instead announce job layoffs and company restructuring.
A major shift in market share in favor of Chinese players remains underway. Sinovel, Goldwind and Dongfang, accounted for 3.6% of the market in 2006, last year that figure reached 27%, and the number is likely to rise.
For the first time, Sinovel, China’s largest wind energy manufacturer, took a larger market share (11%) than rival GE Wind (9.2%) in 2010.
“You’re going to see more and more international players, I welcome that,” said Vic Abate, vice president of GE Energy’s Renewables business. “I think the competition’s healthy but you’re not going to be able to do it without building out a business in key markets and that takes time. Just shipping equipment from one market to another economically tends to be challenging.”
He said GE will focus on selling turbines across the globe where appetite might be greater and government incentives higher than in the United States, where the production tax credit (PTC) is set to expire in 2012.
International Cooperation
By relying on international markets for survival, GE is taking a route that has become increasingly common in the energy industry.
But even as it opens opportunities, international projects can often be complicated by local politics and regulatory shifts that are becoming increasingly unpredictable.
TransCanada’s proposed Keystone XL pipeline would bring tar sands from Alberta through the United States to the Gulf of Mexico. Construction will cost an estimated $7 billion and when completed would carry crude oil some 1,700 miles to a port where it could be shipped on to international markets.
But the pipeline’s construction has been stalled in the US State Department’s review process. Although President Obama initially postponed a decision till after the 2012 election, Congress Republicans included a rider in the extension of the payroll tax cuts that will require Obama to make a decision on it within the next 60 days.
Meanwhile, the pipeline material is already laying on the ground in North Dakota waiting to be constructed. And Alberta politicians, like Premier Alison Redford, have realized they will need to play the game of American politics to get the project moving.
