The Institutional Investor Guide to Modern Energy - (Page 14) The Institutional Investor Guide to Modern Energy Hot Energy Markets Powering the BRICs with Wind now, the western state of Maharashtra is emerging as a hub for wind farms. Suzlon Energy, the domestic wind turbine maker, is developing a 1,000 MW wind park near Dhule, Maharashtra that would be one of the largest wind parks in Asia. Brazil: Squeezed between hydropower and bio-fuels, wind energy is playing a secondary role in Brazil’s renewable energy industry despite the country’s enormous wind resource potential: It is estimated that Brazil could easily generate 143,500 MW of electricity. This Latin nation’s installed wind capacity totaled 341 MW at the end of 2008, up 94 MW from the 247 total at the end of 2007. Between 1999 and 2005, the country’s wind capacity increased just incrementally; then an addition of 208 MW boosted it to 237 MW in 2006. The wind sector is expected to receive a lift when the Brazilian government holds an auction of wind energy licenses during the first half of this year. A government program approved in 2002 to stimulate the development of biomass, wind and small hydropower generation proved disappointing for the wind sector. The Brazilian Wind Energy Association has supported the creation of tax incentives as part of a long-term strategy to encourage the development of a wind turbine manufacturing industry and to generate demand. Up to now, the sector has been hindered by import duties and taxes that reduce wind project profitability, and regulations requiring local production sourcing must be met. With more than 196 million people and a land mass nearly the size of the United States, Brazil holds enormous potential for wind. The northeastern, southern and southeastern regions of Brazil, which has more than 196 million people, offers the most potential — and the best sources of financing. n Energy planners in emerging markets are planning for massive contributions from wind China: China is sure to remain one of the world’s fastest growing markets for wind energy, with more than 1.3 billion people, economic growth of 9 percent last year, and a giant landmass with lengthy coastline suitable for capturing wind. In 2008, the Asian nation once again doubled its installed wind capacity, bringing 6,300 MW online and reaching a total capacity of 12,210 MW. That pushed China to fifth from fourth place in installed capacity, behind the United States, Germany and Spain. The economic powerhouse posted an average annual growth rate of 56 percent between 2001 and 2007, doubling its capacity in 2007 when it added nearly 3,300 MW. The 2007 figure was nearly triple the 1,300 MW added in 2006. The domestic industry has survived the global credit crunch with the help of the Chinese government, which has identified wind energy as an economic growth area and provided financial backing. It also has encouraged the domestic industry’s development through public policy. Wind power concession projects of more than 50 MW, for example, must be approved by the National Development and Reform Commission and 70 percent of all wind turbine components must be sourced in China. To ensure buyers, the government mandates that all electricity produced by a project must be purchased by the provincial power grid company. India: In 2008, this Southeast Asian nation of 1.15 billion people added 1,800 MW of wind energy, bringing its overall installed capacity to 9,645 MW. It holds the world’s fifth-place wind market slot, right behind China. In 2007, India added more than 1,700 MW of installed capacity, a 28 percent hike over 2006. The wind energy sector has been helped by the State Electricity Regulatory Commissions, created in most of India’s 29 states after the passage of the Electricity Act of 2003. These commissions encourage the use of wind with preferential tariffs and renewable purchase obligations, which require an energy distribution company to buy a certain amount of electricity from renewable sources. The federal government also has a set of fiscal and promotion incentives, such as a10-year income tax holiday and 80 percent depreciation of equipment during the first year of installation. While the southern state of Tamil Nadu has drawn most of the development up to 14 • Institutional Investor Guide to Modern Energy • March 2009 This Special Report was prepared by the Special Projects Department of Institutional Investor.
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