Emerging Markets Oust Europe As Most Attractive For Energy Investment

Emerging markets have increased in attractiveness for renewable energy investments, as European markets have almost universally sunk, according to EY’s Renewable Energy Country Attractiveness Index.

The Renewable Energy Country Attractiveness Index (RECAI), released this week, is the first refreshed edition of the RECAI based around “five pillars of attractiveness” — macro fundamentals, energy imperative, policy enablement, project delivery, and technological potential.

In this latest edition, emerging markets now represent half of the countries in the 40-strong RECAI, including four African markets in the top 30, and several new countries in the top 40 — not bad, considering just a decade ago on China and India were deemed competitive enough of the “emerging markets” to compete with more developed markets.

Of the top 15, Chile, Brazil, Mexico, and South Africa all climbed higher, while Germany, France, and the United Kingdom all dropped — with the UK dropping out of the top 10 for the second time in a row. (The full list of 40 can be seen below.)

“Emerging markets are transforming their energy industries at an unprecedented pace,” said Ben Warren, EY’s Global Power & Utilities Corporate Finance Leader and RECAI Chief Editor. “Last year, renewable energy investments in the developing world overtook those in the developed world for the first time. Latin America, in particular, has become something of a litmus test for how quickly markets can grow.”

According to the report, Chile has become one of the first markets to see renewable projects compete directly with all other energy sources. Additionally, despite a nation-wide economic downturn, Brazil’s renewable sector is “showing surprising resilience,” with its currently-underdeveloped solar market continuing to present investors with a lucrative opportunity.

Argentina became the highest scoring new entrant, dropping in at 18, thanks to the transformation of the country’s economy and the rollout of a new renewable energy program.

“Markets earlier in their renewables journey are benefiting from cheaper and more efficient technologies, lower cost of capital and more reliable resource forecasting,” continued Warren. “The increasingly global flow of capital proves that investors are becoming more comfortable with new markets. We can expect to see massive deployment of low carbon investment in developing markets.

“Yet, ambitious targets and low pricing alone will not be enough to promise investment attractiveness. The ability of markets to climb, or stay in will depend on projects being built, and commercial viability enabling the supply of affordable energy in a competitive environment.”

Renewable Energy Country Attractiveness Index May 2016