China entered the Country Attractiveness Indices table in December 2004 and, since then, has progressed steadily to the top of the All Renewables Index. In the last index, it was tied first with the US.
The US dropped two points in the indices, to fall behind China, after a federal Renewable Energy Standard was not enacted this summer. Construction of new renewable energy facilities is expected to slow down further following the December 2010 expiration of an important deadline in the Treasury grant program, with no assurance of renewal generating investor uncertainty about the continuation of an effective incentive mechanism.
“China’s surge to pole position has been underpinned by strong and consistent government support for renewable energy. This, together with substantial commitment from industry and the sheer scale of its natural resources, means that its position as top spot for renewable energy investment is well-merited,” Ben Warren, Ernst & Young’s Environment and Energy Infrastructure Advisory Leader, explains.
“Although the United States remains a highly attractive location for investors in renewable energy, it is clear that recent events have stalled momentum. The US market continues to have significant potential but requires consistent political support to provide investors with the long-term confidence they need,” adds Warren.
“Some other markets, most notably Spain, are also showing signs of wavering support largely due to 'tariff deficits' and the underlying affordability of support mechanisms. We expect this may remain a feature for some time, and points to the need for governments to continue to make the case for renewable energy and how this can add value to their economies,” Warren ends.
UK stable but greater clarity needed
The Indices also saw the UK stay ranked as the fifth most attractive location for renewable energy investment. Although the Coalition Government indicated its strong support for renewable energy expansion, there is nevertheless a significant level of uncertainty about the future of renewable policies, which may cause some discomfort for investors.
Ben Warren said: “Following the introduction of feed-in tariffs for micro-generation, there has been a surge of activity in the market. Policy-makers could keep the positive momentum going by providing greater clarity on the impending heat incentive and the broader energy market review.”
Spain and Germany lose ground
The Indices saw Spain receive a single point downgrade largely as a result of current deliberations regarding retroactive changes to the photovoltaic (PV) tariffs. If implemented, these are expected to have a significant detrimental impact on Spain’s rating across the whole renewables sector, reflecting increased regulatory risk of investing in Spain. Germany also dropped a point, having finally announced cuts to solar PV tariffs, which are set to limit future installations given the frantic rush to install in the first half of the year prior to the announcement.
India, too, suffered a one-point drop following its government’s mandate to use local PV manufacturers for the 22GW National Solar Mission. Indian PV module makers may not be able to keep up with the surging domestic demand, impairing the country’s ability to meet its ambitious solar energy target.
Australia increased its rating by one point, following its Senate passing amended legislation that targets 20% of energy from renewable sources whilst committing A$652.5m (€458m) over four years to set up a Renewable Energy Future Fund. However, doubts still remain whether the new government will establish a national market for trading carbon emissions.
“Cleantech, including renewable energy, represents the technology and business model innovation that is driving the global transformation to a more resource efficient and low carbon economy. A successful outcome of this massive transformation requires collaboration among all stakeholders, including policy makers,” concludes Gil Forer, Ernst & Young’s Global Cleantech Leader.
For additional information:
Ernst & Young’s latest Renewable Energy Country Attractiveness Indices
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