While energy affordability is becoming a major political issue in the mature markets, the emerging markets are becoming increasingly attractive to renewable energy investors looking for stable policy environments according to EY’s latest quarterly Renewable energy country attractiveness index (RECAI).
“When looking at markets from an investment perspective, we’re seeing a gap developing in terms of attractiveness,” said Gil Forer, EY’s Global Cleantech Leader. “On one side are countries that are in the process of reviewing, revising or rescheduling their energy policies, which is leading to uncertainty in the markets. On the other side countries are attracting investors by galvanizing large-scale deployment and removing barriers, as we’re seeing in emerging markets such as Brazil and South Africa,” he added.
“Governments must work harder to create stable markets in order to secure energy investment. The climate change talks currently taking place in Poland highlight the significant added value of renewable energy from economic, social, and environmental perspectives; which can only help to focus governments’ attention further,” Forer said.
The US remains in first place in the RECAI, which ranks countries on the attractiveness of their renewable energy investment and deployment opportunities, based on a number of macro, energy market and technology-specific indicators. However, while the US recently launched New York’s first green bank, to leverage at least US$1b in private investment for clean energy projects, concerns including the impact of shale prices on policy makers and a lack of long term energy policy may lead to renewable energy investor nervousness in the coming months, according to Ernst & Young Global Limited.
Other markets experiencing delayed investment, abandoned projects and market exits due to political interventions include Australia, where the new government is drafting legislation to abolish the country’s carbon pricing mechanism in 2014. In Germany, which is placed third in the index, Chancellor Merkel is facing pressure from the energy sector to re-examine the renewable energy subsidies. Meanwhile in the UK, political point scoring on rising consumer energy bills only heightens uncertainty for investors. In Poland, a proposed switch from green certificates to competitive bidding has received mixed responses.
Not all markets are suffering from political indecision. China continues to pursue its ambitious 2015 solar target of 35GW, with the introduction of solar tax breaks and subsidies and the implementation of specific measures to facilitate consolidation. Internationally, the EU’s decision to impose minimum pricing and quotas on Chinese solar equipment is expected to leave the European solar industry facing an uncertain two years ahead, according to Ernst & Young Global Limited.
“China has ambitious renewable energy targets. Through a variety of tools such a 50% tax break on the sale of solar power until 2015, limits on solar factory expansions and a requirement for 3% of annual revenue to be spent on R&D, the government is creating a strong pipeline of innovation and deployment. While the minimum pricing proposed by the EU has handed Chinese manufacturers a very welcome boost to their margins, by guaranteeing prices for two years, what everyone is waiting to see is the impact this will have on European installers and developers,” Ben Warren EY’s Global Cleantech Transactions Leader said.