The Mediterranean energy sector will need to transform itself over the next decade due to energy security issues, according to the latest edition of the EY Renewable Energy Country Attractiveness Index report.
As part of the EY’s 44th issue of its Renewable Energy Country Attractiveness Index, a feature outlines the key findings of a panel of experts who gathered together recently in Rome to explore whether the Mediterranean can use energy to secure its own future.
Primary among their findings was the role that renewable energy can play in securing the energy security of the region, as not only a cost-effective energy deployment option but also as a way to create jobs that will themselves further spur economic growth. Specifically, the expert panel identifies distributed generation as a critical means of moving beyond the current challenge of an aging or simply absent transmission infrastructure.
“The Mediterranean region can use energy as a way of securing its own future,” explains Ben Warren, EY’s Global Power & Utilities Corporate Finance Leader and RECAI Chief Editor. “But to achieve this, policymakers must level the playing field, the industry must drive down cost and investors must be willing to innovate.
“Clear objectives to accelerate renewable energy capacity build-out — which is quickly becoming the most cost-effective way to tackle energy security issues — combined with the effective deployment of storage technologies, will undoubtedly shape the investment attractiveness of different markets in the months and years ahead.”
Many countries across the Mediterranean are still suffering in the wake of the global financial crisis, and parts of neighboring North Africa are still recovering from the political and social unrest of the Arab Spring. Unemployment is down almost across the board, and as a result, EY determined that “the region risks generations’ worth of lost economic development, or at the extreme, failing to recover at all.”
The EY Strategic Growth Forum (SGF) panel that met in Rome arrived at several key actions stakeholders across the region must make:
- Energy policy must be about enablement rather than intervention, focusing on creating a level playing field across different energy sources, removing barriers to market competition and aligning R&D and education with industry.
- Industry itself needs to prioritize cost reduction to make energy more affordable, and supply chain and infrastructure projects more bankable. More sustainable and flexible business models are also required to adapt to a changing generation mix and a more empowered consumer.
- The investment community should continue to develop innovative financing solutions and build on successes to date around aggregation, including for example, yieldco, leasing, and bonds (e.g. green sukuk). Private sector investors must also be proactive in stepping in to complement development banks in emerging markets, while large energy users and corporations should be welcomed as a new source of capital.
- Opportunities for energy efficient infrastructure upgrades in cities, including smart street lighting, should be converted into an investable asset class based on credible business cases that quantify the significant potential for broader societal benefits as well as energy and cost savings.
Addressing the region’s energy security issues will be beneficial enough, but as EY notes, the “potential rewards from tackling these issues go far beyond energy security alone” including “the potential for local industry and job creation across the energy value chain, as well as opportunities for policy and investment communities.”
Image Credit: NASA’s Marshall Space Flight Center via Flickr, CC BY-NC 2.0