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Europe Faces Growing Pains in Renewable Energy Market

solar-panels21Europe’s renewable energy market is being hurt by falling prices, lower demand and the ongoing credit crunch. As a result, key players in the solar and wind markets are faced with difficult choices in order to survive current market conditions.

To combat rapidly falling prices and market shares, European solar cell and module makers may be forced to speed up their production shift to Asia, reports Reuters.

The European solar sector is suffering from an oversupply of cells and modules that has driven down average selling prices (ASPs) for solar systems, together with Asian companies stealing market share by slashing costs, the article said.

In addition, China announced an incentive program for solar firms last week, including a 50 percent subsidy for investments on solar power projects, that could further reduce production costs, already among the world’s lowest, reports Reuters.

According to a survey by German industry publication Photon, China accounted for about a third of the market for global cell production in 2008, while Europe’s share declined to 25.6 percent last year.

Chinese module makers now have a market share of about 50 percent in Germany from zero a year ago, according to a UBS report, though Germany is still expected to become the world’s biggest market by installation.

Thiemo Lang, senior portfolio manager for Zurich-based Sustainable Asset Management, told Reuters the only way for Western producers to regain their footing is to build production bases where their Asian competitors are.

A lack of cash is also hurting the wind industry. The UK government is expected to announce £1billion (about $1.6 billion) of lending to wind farm developers to kick start 1 gigawatt of onshore wind schemes that have been stalled by the credit crunch, reports The Guardian.

The initiative comes as Greenpeace unveils new figures showing that local councils run by the Conservative party block more than three times as many wind farms as they approve, reports The Guardian.

Both issues are important because Vestas, the UK’s only major wind turbine maker, is threatening to close its manufacturing plant on the Isle of Wight this week in part blaming a lack of a strong domestic market.

The government’s cash infusion is part of the additional £4billion (about $6.6 billion) of European Investment Bank (EIB) lending to support UK energy projects announced in the spring budget. The government has been urged by environmentalists and thinktanks to use the state equity stakes in banks, gained when they had to be bailed out last autumn, to push them towards green projects, according to the UK newspaper.

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