Renewable Energy Sector Seeing Slowdown; + Sudan-South Sudan Tensions Persist
After a boom in renewable energy during the last decade, which was characterised by high installation rates and continuous flows of investment (reaching a record high of US$257bn in 2011), we are now seeing a slowdown for several reasons:
- Global economic weakness is resulting in cuts to renewable energy subsidy programmes.
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owing competition between manufacturers is driving both turbine and solar panel prices lower.
- Profit margins for manufacturing companies are being eroded.
- Problems are being exacerbated by cheap Chinese products flooding the sector, and not enough demand to pick them up, leaving the market saturated.
A few key trends are emerging as a result:
- An increased number of consolidations within the industry, usually acquisitions of small companies that have gone bankrupt, a trend we’ve seen with US solar companies in particular, which are doing especially badly.
- Governments are adopting protectionist measures against Chinese solar equipment manufacturers in order to help support domestic market. The US has done this already and the EU decided to look into the issue in September 2012.
- Renewable energy equipment manufacturers are beginning to diversify their business portfolios towards developing countries (Latin America and Central and Eastern Europe mainly). They are also looking to move down the value chain to the more profitable development and retail segment, for example, operating power projects instead of just providing components for them.
Further analysis of the global renewable energy sector is available to subscribers at Business Monitor Online.
Sudan And South Sudan Divorce Pains Linger
Elsewhere, the political and economic acrimony between Sudan and South Sudan, as well as difficulties within each country’s borders, are likely to persist. In summary:
- Oil production from South Sudan has yet to recommence, after being shut down in January this year due to disputes about oil transit fees for the use of Sudan’s pipelines.
- Despite a high-profile meeting between the two countries’ leaderships in Ethiopia, there has been no decision on the demarcation of a final border between the two countries, including the fortunes of a large area called Abyei, which is home to rival ethnic groups and divided loyalties, and the area around Heglig, a town most third-party observers call a part of Sudan, but which South Sudan claims is part of its own Unity State. Heglig is home to important oil fields and infrastructure.
- While overt military tensions have ebbed somewhat since the two countries were on the brink of war a few months ago, both sides still blame each other for sponsoring rebel groups and provoking violence within their borders, and violence in some states is still common.
- Inflation, which has been exacerbated by conflict and disruption to trade, is still very high in both countries, at around 40%. While this actually represents a decline from the (much more volatile) price growth in South Sudan, in Sudan inflation has yet to peak.
- Fiscal positions in both countries, which have heavily relied on oil revenues in the past, have been hit hard, resulting in severe cutbacks in both countries, and unprecedented protests in Sudan.
On a more positive note:
- An agreement on oil transit fees between the two Sudans was finally reached in the Addis Ababa meeting, at an average of US$9.48 per barrel. After some more sabre-rattling, both parliaments finally agreed this week to let crude production and export restart. It should take at least three months for this to actually happen.
- We expect that the recent devaluation of the Sudanese pound, Khartoum’s much closer cooperation with the IMF in recent months, and the reopening of the border should help to alleviate price pressures in both countries, although it will take time for these measures to have an effect.
This Week’s Trivia Question
Last week we asked, “What historical event took place in Europe on October 13, 1307? Hint: the event was referenced in a 2003 bestselling mystery-thriller novel and inspired a major plot point in the highest grossing film of 2005.” The answer is that King Philip of France ordered the mass arrest of the Knights Templar, leading to their downfall. The event was referred to in Dan Brown’s The Da Vinci Code, and inspired the Emperor’s elimination of the Jedi Knights in Star Wars Episode III: Revenge of the Sith.
This week, something completely different: Which former (and now deceased) Head of State recently had a bronze statue of himself unveiled in Mexico City, adding to a list of several eastern European and Asian cities which now have statues of him? Hint: If you’ve been reading Risk Watchdog lately, you’ll know that his country faces rising war risks.