Today's utility decisions will have long-term renewables impact
July 25, 2013 | By
Barbara Vergetis Lundin
Global investment in the renewable energy sector is set to continue to decline in the short term from the 11 percent fall seen in 2012, according to research from Deloitte Touche Tohmatsu Limited (DTTL). "Global investment into the renewable energy sector is likely to remain subdued in the near time. Yet over the long term, the sector will be more attractive, as technology improves and costs decline," said Jane Allen, DTTL global leader, renewable energy. "In the meantime, investors need to choose their spots wisely, because it's not going to get any easier anytime soon." For utilities, planning and decision making in the near term in a number of areas will be critical. For example, there are no easy answers when it comes to mitigating the risks of the shale gas revolution, which has created new uncertainty for the near-term investment prospects of renewable energies. In some ways, it is unavoidable, according to Allen, as growth in the renewable energy sector is not likely to increase while gas prices are as low as they are. In many cases, the key deterrent to investment is the lack of regulatory frameworks suitable to ensuring economic returns. This leads utilities to question whether it is more economical to upgrade existing energy infrastructure, build new facilities on the foundation of the existing infrastructure, or invest in the new infrastructure of the "Third Industrial Revolution." "It is important for utilities, investors, developers, and governments to understand the evolving renewable energy landscape so that they have the long-term context for the short-term decisions they must make," said Allen. "Subsidies and further technological refinement and innovation are going to continue to be needed in the short- to medium-term. Companies must take advantage of the subsidies where possible, but must also develop a strategy that takes into account their eventual phase out. The current low cost of natural gas in North America and the expectation of this dynamic spreading globally will also suppress investment in renewables for the short-term, but this is likely to ease as gas prices level out with rising demand." For more: Sign up for our FREE newsletter for more news like this sent to your inbox! © 2013 FierceMarkets. All rights reserved. http://www.fierceenergy.com |