Ernst & Young: Political support and clear policies critical

By Rob Starr, Content Manager, Big4.com

According to Ernst & Young’s latest quarterly global renewable energy Country Attractiveness Indices report (CAI) released recently, having quadrupled its solar capacity target to 50GW by 2020 and began an accelerated domestic installations program to tackle the oversupply of solar panels, China looks set to continue its domination of the global renewable energy market. During Q2 2012, China remained at the top of the All Renewable Index (ARI) but has a number of challenges to overcome, such as the oversupply of wind turbines and solar panels and resolving grid transmission issues.

Looking at other markets, continued uncertainty regards the extension of the PTC in the US, and Germany’s introduction of a new roof-top PV tariff (to both deliver its ambitious renewable goals as well as revive a flagging domestic PV industry) put these markets on level pegging in second spot. In fourth place, India recently suffered severe blackouts leading to speculation that the country has attracted insufficient private investment to modernise its power infrastructure and that renewable energy investment may suffer amid wider power system reforms. As a result, India has fallen a point in the ARI.

Despite dropping half a point, the UK has risen to fifth place in the ARI, due to a fall in Italy’s ranking in response to worsening economic conditions. While a number of UK policy and subsidy announcements were made during Q2 2012; the general consensus appears to be that these announcements have fallen short of delivering certainty for investors. Indeed, the continuing battle within the coalition government between an apparent pro-gas stance, and the more pro-renewables view is serving to undermine the rhetoric that the UK energy market is a great place to invest.

Q2 2012 saw total new investment in the sector of US $59.6b (€48b), up 24% from Q1 2012, with China experiencing a 92% increase on Q1 2012. Europe and the US saw an increase in total new investment of 11% and 18% respectively in Q2 2012, the majority of which was driven by new build asset finance. While the number of deals remained broadly the same, the value of these transactions increased by around 40%–50% across the two regions.