China reclaims the top spot for renewables energy investment attractiveness, while Europe and the US lose ground to emerging markets

EY LLC, Kyiv, Ukraine, 
Fri, Nov 21, 2014

•          Capitol Hillparalysis sees the US fall to second place, though investment opportunitiesremain significant

•          Microfinance andenablement  are critical to growth inglobal clean energy investment volumes

LONDON, 21November 2014: China’s renewables market is the most attractivedestination for investors looking to invest in the sector, according to EY’sRenewable Energy Country Attractiveness Index (RECAI).

The RECAI ranks 40renewables markets on the attractiveness of their energy prospects. In asignificant reshuffle at the top of the index, China returns to the top for thefirst time since May 2013, while Europe and the US continue to lose ground toemerging markets. Despite significant deployment and investment opportunitiesin the US renewables market, congressional gridlock and drawn-out approvalshave had a negative effect on the country’s ability to provide investors withlong-term certainty, causing it to fall to second place.

Gil Forer, EY’s GlobalCleantech Leader comments:

“China’s government isplacing increased emphasis on renewable energy as the country battlespollution, ushering in new market opportunities for foreign investors. Aggressive policy targets, an increased focus on consolidation and the roll-outof pilot carbon emissions trading schemes also support the country’s pollutionreduction initiatives and reflect the renewables sector’s strategic economicvalue.”

Index reshuffle

Elsewhere in the index,only two of the traditionally attractive markets managed to hold on to their previousrankings. Germany and Japan remain static, in third and fourth placerespectively, as their markets reflect on the latest legislative and energystrategy updates. In contrast, mixed signals and policy tinkering have promptedyet another drop in the rankings for the UK and Australia, to seventh and tenthplace respectively. At the same time Italy and Spain are seeing the repercussionsof retroactive changes to support mechanisms, with both falling several placesdown the index.

On the other hand,dynamic emerging markets are becoming more prominent in the index. India jumpedto sixth place as an energy sector overhaul by the new government looks set togalvanize public and private renewables investment. In what is becoming aconsistent theme, Brazil, Chile, South Africa and Kenya have again risen up theindex thanks to robust deployment pipelines and consistent policy support whilemajor project financings in the Netherlands and Israel have prompted a boost inthe rankings for these markets.

Forer continues, “Thesignificant movement in our index reinforces the view that attractive renewableenergy prospects are no longer the remit of only a few mature markets - theyare truly global, providing opportunities in both developed and developingmarkets. This shifting landscape will drive corporations and governments toreview their energy strategy to ensure long term competitive advantage.”

Reviving Europe

The latest reporthighlights that Europe is currently at an inflexion point, striving to become aglobal sector leader but facing strain funding, infrastructure and supplycapabilities.

According to BenWarren, EY’s Global Cleantech Transactions Leader, “The industry must liberateitself from the shackles of the past and go in search of grid parity as thefastest route to secure and affordable energy. The role of policy-makerstherefore becomes one of enablement rather than fiscal support, as well aslooking to create a level playing field across all energy sources throughgreater cost transparency.”

Microfinance models to become more than just a trend

The report highlightsthat smaller-scale distributed applications are becoming increasingly morecritical to both developed and emerging markets with  the outlet for localized financing models,such as crowd-funding is expanding as a result. The pool of capital availablefor such financing has significant potential to increase if the risk-rewardprofile can be structured such that it becomes a viable alternative to otherretail investment channels.

Warren comments:  “Far from just being the remit of the‘socially conscious’ investor, crowd and community sourced finance isincreasingly becoming a smart investment channel with a significant role toplay in shaping our future energy mix and creating the stimulus for new fundingmodels to emerge.”

The report also focuseson the imperative for more cost-effective and sustainable energy across theworld’s island nations, representing significant investment and deploymentopportunities as well as the potential to lead in the creation of new energymicrosystems. According to Warren,  “Thequestion is whether today’s investors, developers and innovators want to be atthe forefront of creating an island model of energy with potentially far-reachingimplications for the global energy sector, or just wait to ride the second waveas micro goes macro.”

Looking forward

With new clean energyinvestment of US$63.6b in Q2 representing the strongest quarterly performancein two years and indicating a rebound in annual global investment for 2014, thelatest RECAI report concludes that an increasing shift toward democraticfinance and the opening up of new markets will be critical in maintaining thisuplift in global investment volumes.

“Consumers, including homeowners, commercial businesses and corporations, are becoming more empowered totake control of their own energy supply and demand. As a result, investors arealso becoming increasingly motivated and empowered. This is not only drivingthe democratization of energy, but is also channeling significant volumes ofcapital to where they are most needed,” concludes Forer.

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

About the RECAI

The RECAI report ranks its40 entries on the attractiveness of their renewable energy investment anddeployment opportunities, based on a number of macro, energy market andtechnology-specific indicators. 

The index rankings tracks40 markets worldwide: Australia, Austria, Belgium, Brazil, Canada, Chile,China, Denmark, Finland, France, Germany, Greece, India, Indonesia, Ireland,Israel, Italy, Japan, Kenya, Mexico, Morocco, the Netherlands, Norway, Peru,the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, South Africa,South Korea, Spain, Sweden, Taiwan, Thailand, Turkey, Ukraine, UK and the US. 

About EY’s Global Cleantech Center

From start-ups to largecorporations and national governments, organizations worldwide are embracingcleantech as a means of growth, efficiency, sustainability and competitiveadvantage. As cleantech enables a variety of sectors, old and new, to transformand participate in a more resource-efficient and low-carbon economy, we seeinnovation in technology, business models, financing mechanisms, cross-sectorpartnerships and corporate adoption. EY’s Global Cleantech Center offers you aworldwide team of professionals in assurance, tax, transaction and advisoryservices who understand the business dynamics of cleantech. We have theexperience to help you make the most of opportunities in this marketplace, andaddress any challenges. Whichever sector or market you’re in, we can providethe insights you need to realize the benefits of cleantech. 

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