Renewable Energy Investment Attractiveness Sees China Soar, US & UK Lose Ground

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There has been a lot of figurative-column space given over to China’s recent efforts to combat pollution by investing heavily in clean energies. From banning coal to increasing its renewable energy targets, China has become a clean-tech investors dream, a point borne out by its return to the top of Ernst & Young’s Renewable Energy Country Attractiveness Index.

The Ernst & Young Renewable Energy Country Attractiveness Index ranks 40 markets worldwide on the attractiveness of their renewable energy investment and deployment opportunities.

Their latest report finds that China has ascended back to the top of the Index, supplanting the United States which has fallen to second. Political uncertainty in the UK and Australia have dropped them in the rankings to seventh and tenth respectively, while Germany and Japan remained static at third and fourth place respectively. Meanwhile, strong deployment and consistent policy support has seen Brazil, Chile, South Africa, and Kenya again rise up the index.

“The significant movement in our index reinforces the view that attractive renewable energy prospects are no longer the remit of only a few mature markets – they are truly global, providing opportunities in both developed and developing markets,” said Gil Forer, EY’s Global Cleantech Leader. “This shifting landscape will drive corporations and governments to review their energy strategy to ensure long term competitive advantage.”

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China Leading

“China’s government is placing increased emphasis on renewable energy as the country battles pollution, ushering in new market opportunities for foreign investors,” said Forer. “Aggressive policy targets, an increased focus on consolidation and the roll-out of pilot carbon emissions trading schemes also support the country’s pollution reduction initiatives and reflect the renewables sector’s strategic economic value.”

Dropping

Unsurprisingly, given such political uncertainty affecting the renewable energy markets, the US, UK, and Australia have all suffered drops.

As Ernst & Young note, “despite significant deployment and investment opportunities in the US renewables market, congressional gridlock and drawn-out approvals have had a negative effect on the country’s ability to provide investors with long-term certainty.”

Nothing quite so impressive has affected Australia, however, where out-and-0ut government disinterest in supporting renewables has shattered renewable energy investment opportunities, in favour of returning coal to the forefront of government favouritism.

UK Hit Hard

The UK’s ranking on the Index has dropped to its lowest level for almost five years, thanks to a combination of domestic and international factors affecting renewable energy investment opportunities. The Government’s recent announcement that it could possibly withdraw the Renewables Obligation (RO support for solar projects above 5 MW two years earlier than planned has hit hard.

“What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market,” said Ben Warren, Environmental Finance Leader at EY. “The booming UK solar sector, one of only six markets globally to surpass the 5GW installed capacity, was caught by surprise by the Government’s consultation in May. Legal challenges and investor petitions have been launched in response, urging the Government to give the sector more time and greater policy stability to compete with conventional fuels.”

Meanwhile, stiff international competition is also threatening the UK’s ability to attract investors, as emerging markets provide increasingly more attractive opportunities.

Emerging Markets

Such markets, such as Brazil, Chile, South Africa, and Kenya, are seen as some of the new favourites on the block. As Gil Forer said above, renewable energy investment “prospects are no longer the remit of only a few mature markets – they are truly global.”

As we’ve seen, India could be well on their way to pushing for 15 GW of new solar capacity by 2019, thanks to almost-never before seen governmental support for renewable energy.

The future for renewable energy is bright. Alternative funding models are increasing the variety of clean technology available to all sectors — including the public. Smaller-scale distributed applications are becoming more and more prominent, making up a lot of the total projects on offer throughout countries like the United States — even if the large-scale sector walks away with the highest capacity.

Ernst & Young point out the increasing popularity of crowd and community funded projects.

“Far from just being the remit of the ‘socially conscious’ investor, crowd and community sourced finance is increasingly becoming a smart investment channel with a significant role to play in shaping our future energy mix and creating the stimulus for new funding models to emerge,” comments Ben Warren, concluding:

“Consumers, including home owners, commercial businesses and corporations, are becoming more empowered to take control of their own energy supply and demand. As a result, investors are also becoming increasingly motivated and empowered. This is not only driving the democratization of energy, but is also channeling significant volumes of capital to where they are most needed.

“Looking forward, advancements in technology, changes in policy, and continuous reduction in cost will enhance the new energy landscape and drive affordable, reliable and low carbon energy in more areas around the globe.”