US Overtakes India On EY Renewable Energy Country Attractiveness Index, China Remains #1
China remains atop EY’s Renewable energy country attractiveness index for the third time in a row, while at the same time the United States and Germany have overtaken India to secure second and third place respectively.
The EY Renewable energy country attractiveness index (RECAI) is one of the more helpful tools provided by analysts, doing exactly what its name suggests, which is ranking the renewable energy attractiveness of countries around the world. This is the 51st edition of the RECAI, and EY Global Power & Utilities Corporate Finance Leader Ben Warren, who is also the RECAI Chief Editor, opens this edition by focusing on the increasing threat of protectionism to the renewable energy sector.
Specifically, Warren raises the concern of a potential 70% tariff on imported solar panels in India, as well as the existing 30% solar import tax already in place in the United States. “Rising interest rates and the end of quantitative easing are set to raise the cost and reduce the flow of cheap capital that has underwritten the dramatic roll-out of renewable energy capacity over recent years,” Warren adds, and also points to the reduction or elimination of government subsidies.
“These factors are forcing a relentless focus on costs within the sector,” said Warren, introducing what is, therefore, something of a negative-toned RECAI.
However, as Warren explains further, maybe not all is doom and gloom:
“Rising interest rates are likely to increase the cost of cheap capital that has underwritten the dramatic roll-out of renewable energy capacity over recent years. Government subsidies for clean power are being reduced around the world and financiers are anticipating tougher times ahead for project developers. However, movements in the Index suggest that these developments are just headwinds as the renewable energy sector continues to mature and markets expand.”
As such, looking at the rankings (see below) we see a range of activity that might speak to bigger things afoot than the obvious headwinds and challenges currently facing the renewable energy sector. The resilience of the US market is one, helping boost its position to number 2 overall, while the UK climbed three places to seventh with the market adapting to subsidy-free solar PV, onshore wind projects, and the repowering of older wind farms.
The rapid expansion of the renewable energy sector in the Netherlands helped it climb from 15th to 9th spot, such as recent offshore wind projects being awarded without the need for government subsidies, a growing solar PV market, and the government’s move to meet a 14% renewable energy target by 2020.
“While the current economic climate has driven a relentless focus on costs, that focus is paying dividends with the global cost of electricity from renewable sources falling year-on-year,” Warren added. “Combined with the plunging cost of battery technology, we anticipate further rapid growth of the evolving renewable energy sector in the coming years.”
The large feature that opens this edition of the RECAI focuses on the trend being experienced by many of the world’s largest oil and gas companies to shift their investment strategy towards low-carbon energy.
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