Feb. 25, 2003 -- Almost one-third of the world's population is without electricity and this proportion is rising in tandem with the explosive growth in population figures across the developing world. This poses a major challenge to provide the power desperately needed for the affected regions to develop through cost-effective, reliable and environmentally friendly solutions.

Growing interest in sustainable energy systems is driving a strong global push for the increasing use of hybrid power systems in electricity provision in remote locations for equipment power, such as telecoms stations, and rural domestic users. However, hybrid power is not always the obvious answer to every remote power problem and, in some cases, grid extension or non-hybrid renewable solutions may emerge as the optimum solution.

Nevertheless, a new study by Frost & Sullivan, the international market consultancy, concludes that hybrid solutions will be utilised more frequently as the technology gains widespread acceptance and trust amongst end-users.

While it is usual to blend wind and solar power in combination with a gen-set to charge batteries, some hybrid power systems exclusively use renewable energy techniques. "Gen-sets, small wind and photovoltaic are the three core technologies in hybrid systems and can be utilised as a combination of any two together or even all three," explains Colin O'Hanlon, Research Analyst at Frost & Sullivan.

The global market generated around $169.9 million in 2002, based on all new hybrid power systems installations. Current growth rates are reasonably high, but are expected to take a further leap during the forecast period, driving revenues to $895.2 million in 2010.

Rural electrification in developing countries is the principal force driving demand in the global hybrid power systems market. Each country addresses the objective of improving access to power in rural areas with different methods and different levels of funding and assistance. Government-run rural electrification programmes, incorporating renewable energy technologies, and initiatives by private sector firms are hailed as a panacea for poverty.

Concerted efforts to work with government organisations to win projects for electrification of rural and remote areas is the key to success in the global hybrid power systems market. The pursuit of wider market opportunities will attract new entrants into this sector, thus broadening the availability of capital for research and technology improvement.

Governmental incentives in the form of grants and tax breaks help reduce the capital cost of hybrid power systems and make them more competitive with alternatives such as diesel gen-sets. For example, the scheme operated by the Government of India covers up to 80 percent of the capital cost of a hybrid project and tax savings of around 35 percent through accelerated depreciation.

The study points to a lack of awareness of the benefits associated with the technology amongst governments and other decision-makers, hampering sales in the global hybrid systems market. "The cost of installing equipment, such as towers for wind turbines, is high. This causes many projects to run over budget as unforeseen problems such as poor infrastructure push up transportation costs. The establishment of pilot projects and lobby groups, combined with clearer product and customer definition, will help overcome these hurdles," O'Hanlon says.

"Grid extension and stand-alone gen-sets compete with hybrid power systems for remote power applications. As sales volumes increase, prices of hybrid systems will fall, making them more attractive than alternative technologies. Prices of component parts are already declining, accelerated by increased sales. Installation costs will also take a nosedive as installers become more experienced and competition increases," O'Hanlon comments.

The relative complexity of a hybrid power system makes it more expensive to manufacture and install. Manufacturers' key ambitions include the move towards a more standardised, modular product which would aid capital cost reduction and allow system size to increase in line with electricity demand. Greater production volumes facilitate declining costs throughout almost all stages of the supply chain. As hybrid power system technology matures and greater standardisation occurs, the cost of installation will continue to drop.

Due to their high rates of grid penetration, developed countries will present only marginal potential for growth in the global hybrid power systems market. However, the opportunities this region provides will be less price-sensitive and tend to derive from the consumer and industrial markets. This contrasts with developing countries, where municipal markets will prevail.

Sustained by the government's rural electrification programme, China is the shining star amongst developing countries, displaying the best near-term opportunities for hybrid power system growth. However, barriers for Western companies such as low system prices must be tackled in order to unleash further potential. Asia is predicted to display the brightest growth prospects over the forecast period.

Publication Date: February 2003
Price: EUR 6,000
Report Code: B146

Background

Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilised to complement a series of research publications to support industry participants with customised consulting needs. Interviews and free executive summaries are available to the press.