SEA CDM Market - Opportunities for Equipment Suppliers

Increased Awareness to Curb Emissions Provides Momentum for South East Asian CDM Market

Owing to its favorable topography, Southeast Asia (SEA) has emerged a hot destination for the CDM market participants. Most SEA nations have set renewable energy targets in the range of 8 percent to 20 percent share in their energy mix by 2020 to 2025, giving a huge thrust to the CDM market. Furthermore, supporting legislation, environmental concerns, and international interest in the vast scope that SEA offers are expected to increase the attractiveness of CDM power generation projects in renewable energy. "The substantial gap between the potential and total installed capacity of renewable energy has created immense investment opportunities for both local and international equipment suppliers as well as project developers," notes the analyst of this research service. "Moreover, delayed execution of thermal power projects, coupled with increased interest among international institutions to fund clean energy projects, has been instrumental in providing a major stimulus for the growth of renewable energy initiatives in the SEA region."

Meanwhile, support from international funding institutions and banks has sparked interest among project developers to pursue proposals in biomass power generation. Multinational equipment and component suppliers are likely to partner with local companies to increase the penetration in the local power equipment market. However, some market restraints have added a layer of uncertainty to the development of the CDM market. The present Kyoto Protocol climate regime expires in 2012 and the decision on its continuation is slated for the second half of 2009. Until then, project developers will have to contend with implementation uncertainty in the carbon markets as well as in the level of future carbon emission reduction (CER) credit prices.

Other factors constraining market progression are the current liquidity crunch and the lower value of CERs. "As of early 2009, CER prices beyond 2012 had a very low value because there were no set rules or guidelines to assess the future demand levels for carbon credits," says the analyst. "This issue is likely to affect the projects that will apply for CDM status over the next one to two years, as the investment recovery window for these projects is shortening." At the same time, the ever-increasing demand for electricity throughout the region has hastened the development of various power plants under CDM, creating a new market for power equipment such as multi-fuel biomass boilers and efficient turbines. Customers tend to focus on technology, cost, supplier's previous experience, construction/delivery period, equipment warranty, and company reliability while selecting an equipment supplier. Above all, they will be looking for an ability to provide equipment that conforms to the latest environmental regulations and offers competitive pricing.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

• Biomass boilers
• Small hydro power plants
• Wind turbines
• Geothermal power plants