London, February 2011

Rapid recent solar and wind price falls are likely to bring new markets and mass adoption a step closer over the next decade and raise the prospects of mergers. The financial crisis coupled with a ramp-up in China, which now leads the world wind and solar manufacturing, have led to over-capacity and pressured prices in the past three years.

Natural gas is the main fossil fuel rival and still wins on price after U.S. shale gas finds created a global glut.

But wind and solar are now competitive in niche markets after prices of turbines fell by a fifth and solar panels by a half since 2007. New markets are emerging as they fall further.

"We see it as an extremely potent and powerful trend for the coming decade," said Rupesh Madlani, renewables and clean technology analyst at Barclays Capital, adding that the rate of adoption may take people by surprise.

For renewable energy, 2010 was a year of contrasts. The global wind market shrank for the first time in two decades, with fewer turbines installed than in 2009, but the world added a record amount of solar power, reaping the benefit of generous incentives in Europe.

The price of solar panels, or modules, is expected to fall another 10-25 percent in 2011.

Modules prices would halve again in the next two to three years, predicted Madlani. But other analysts said that the longer outlook is clouded by conflicting pressures.

Additional demand from new markets such as India, China and the Middle East may counter an expected paring of subsidies in key markets such as Italy and Germany, they said.

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