Six suggestions to leverage the growing renewable energy opportunities in emerging markets.

1. How to follow renewable energies
into emerging markets
February 2013
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2. X&Y Partners
How to follow renewable energies into emerging markets
Contacts:
Romeu Gaspar
romeu.gaspar@thisisxy.com
UK: +44 (20) 3239 5245 | PT: +351 210 961 834
Skype: xypartners
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3. X&Y Partners
How to follow renewable energies into emerging markets
How to follow renewable energies into emerging
markets
Six suggestions to leverage the additional revenue, but also a risk for
grow ing renew able energy increased costs and diluted market
opportunities in em erging focus. In this article we explore six
m arkets. suggestions to develop and implement
a sensible market entry strategy for
Large-scale deployment of renewable emerging markets.
energies has so far been concentrated
in Europe and in the US, but that is 1. Follow existing clients into
changing. Take wind energy, solar PV emerging markets
and CSP (Concentrated Solar Power),
Following existing clients (or partners)
for instance: 44%, 35% and 23%,
into new markets is often a good point
respectively, of new capacity for the
to start, as it reduces expansion costs
next 5 years will be deployed in
and risks, while giving companies a
emerging markets (Exhibit 1). For
chance to scout different markets
North American and European
before settling down on the most
companies that have so far focused on
attractive ones. For companies that
domestic markets, emerging markets
get most of its turnover from a limited
can thus represent an opportunity for
Exhibit 1 – Regional breakdown of cumulative and new capacity for wind energy, solar PV and
CSP
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4. X&Y Partners
How to follow renewable energies into emerging markets
Exhibit 2 – Example of a company for which market expansion was a necessity, rather than an
option
2. Do not overlook domestic
number of clients, following key
markets
accounts into emerging markets might
not even be an option but rather a One of the biggest risks of a market
necessity: Exhibit 2 illustrates a expansion operation, especially for
company that simultaneously needed smaller companies, is to overlook
to increase the share of wallet on its domestic markets. This holds
top 5 clients and expand to Asia and particularly true for the renewable
South America, just to maintain the energy sector, which will continue to
same turnover. offer opportunities in Europe and the
US (Exhibit 1).
Following existing clients into
emerging markets is often more A good market strategy will often
straightforward than it seems: when balance domestic and emerging
facing an unknown market, most markets, as well as existing and new
European and US companies will clients (Exhibit 3): retaining and
choose to continue to work with acquiring clients in domestic markets
existing suppliers that they know and offers a lower business development
trust. Expect however smaller cost, while expanding into new
contracts, as your client will probably markets presents an opportunity for
award the less critical elements of the faster growth.
project to local suppliers.
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5. X&Y Partners
How to follow renewable energies into emerging markets
Exhibit 3 – Example of a market strategy that balances domestic and emerging markets, as
well as existing and new clients
announced projects, meaning that at
that stage you are already probably
3. Look beyond market hype
too late. An alternative approach is to
For business development purposes, try to identify early stage market
the most talked-about emerging opportunities. Rather than looking for
markets are often not the most ambitious statements of intention, look
interesting ones. Renewable energy for countries that can genuinely benefit
market buzz is mostly generated by from renewable energies. Take the
ongoing procurement programs and Kingdom of Saudi Arabia, for instance:
Exhibit 4 – The Kingdom of Saudi Arabia’s KA-CARE Program
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6. X&Y Partners
How to follow renewable energies into emerging markets
Exhibit 5 – An example of a niche market opportunity: renewable energy installations for the
growing demand for off-grid telecom towers in emerging countries
the Middle East is nothing more than a
blip in IEA’s forecasts at this point, but 4. The larger markets are not
the country has announced one of the necessarily the most attractive ones
world’s most ambitious renewable
For smaller companies and niche
energy programs (Exhibit 4). While it is
players, going off the beaten track
likely that the program will start later
might be a more attractive option than
and run smaller than intended, there
fighting for the larger markets. This
are bona-fide reasons for the adoption
option requires however a
of renewable energies in Saudi Arabia:
fundamentally different approach:
i) given the reduction of wind and PV
instead of looking for large volume
costs (and the potential of CSP to do
and/or high growth markets, these
so) renewable energies can already
companies should ask themselves two
displace some types of fossil fuel
questions: i) Which emerging markets
generation, freeing oil to sell in
are moving in a direction that will
international markets; ii) the country
create demand for our products and
and its major companies have the
services?; and ii) What products and
funds necessary to support the
services can we develop to better
associated higher investment costs;
address that demand? For instance, in
and iii) renewable energies are labor
a previous article we have discussed
intensive across the entire value chain,
how recent developments in solar PV
offering attractive opportunities for
might overthrow the diesel generator
local economic development.
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7. X&Y Partners
How to follow renewable energies into emerging markets
as the technology of choice for off-grid circumvented in some situations.
mobile base stations, which face Exhibit 6 illustrates our
growing demand in emerging countries recommendation to a European
(Exhibit 5). manufacturer of PV inverters that had
a limited budget to expand to four
5. Combine local presence with
different markets. While local
global scale
Engineering and Sales teams were
The value of local presence is indispensable for most markets, other
unquestionable: business functions such as Installation and
opportunities in most emerging Post-service could be more efficiently
countries are identified, developed and handled through local partners.
closed face-to-face, in the local Furthermore, upstream functions such
language and according to local as R&D and Manufacturing required a
costumes. Furthermore, a growing combination of global and local
number of countries have local content coverage, as the former ensured
requirements for renewable energy economies of scale and the latter
projects, favoring projects that use satisfied local content requirements.
elements developed, manufactured or
6. Ask around
sourced locally.
Unsure of which markets to target, or
However, setting up local presence is
how and when to target them?
expensive, and can arguably be
Gauging your clients, suppliers and
Exhibit 6 – Example of a market entry strategy that combines economies of scale and global
key accounts with local partners and local presence
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8. X&Y Partners
How to follow renewable energies into emerging markets
Exhibit 7 – Example of a company benchmark and expert interview process
Exhibit 8 – Example of an expansion plan sanity check
employees for opinions, interviewing Exhibit 8 illustrates a comparison
experts, and benchmarking your between the revenue and EBITDA
competitors can reveal important growth expectations of an expansion
insights (Exhibit 7). The latter option is plan, with what similar plans from
also a good way to check if your competitors had achieved in the past.
market expansion strategy is sensible:
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