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Diversification and global competition drives renewable energy attractiveness
Fri, April 17, 2015
u India sets its sights onRECAI top spot by 2019
u Due to the difficult macroeconomicsituation and the uncertainty with the "greentariff" Ukraine was pushed aside out of the top 40 countries with developingeconomies, which over the past six months have introduced advanced tools to support renewable energysector
u Sub-Saharan Africa unlocks almostUS$30b as investment barriers are broken down
LONDON, KYIV, 17 April 2015. A focus on energy diversification and increasing competitive pressureon both governments and investors is driving renewable energy attractivenessand bringing new investment destinations to the fore, according to EY’s latest Renewable energycountry attractiveness index (RECAI).
Ben Warren, EY’s Global Power & UtilitiesCorporate Finance Leader and RECAIChief Editor, says:
“Ongoing oil price volatility and geopolitical challenges continue toemphasize the importance of energy diversification as a means of achievinggreater energy security. Renewables are becoming an increasingly important partof the broader generation mix for many countries, resulting in a number of marketsclimbing our attractiveness index. Global investment in renewables toppedUS$300b in 2014, exceeding investment in new nuclear and fossil fuelgeneration.”
The report highlights India and Sub-Saharan Africa as key examples ofmarkets attracting increasing foreign interest and creating new competition fortraditional investment destinations.
Warren says: “Governments and policy-makers must now workeven harder to establish transparent and credible energy policies for thelong-term, including delivering often-difficult market reforms, to set the tonefor renewable energy investment in the years ahead.”
Legislative clarity shakesup the index
The latest index saw India climb to fifthplace, reflecting the significant investment and project momentum resultingfrom the Government’s ambitious renewables targets and policy reforms toimprove the investment climate. In an exclusive interview published in thereport, Energy Minister Piyush Goyal describes how India’s focus on attractingmore than US$100b in renewable energy investment in the next five years willhelp the country climb to the top of the index by 2019.
While fortunes in Europe remain mixed, positive policy signals in anumber of markets are likely to create traction over the coming year. France movedup to seventh place, as the progress of its energy transition bill createsmuch-needed certainty over the country’s 2030 renewables ambitions. Similarly,additional details brought greater clarity to the legislative framework forcompetitive tenders in Poland, and the commitment by the Swedish Government toshift away from nuclear toward 100% renewables sends a clear message to themarket.
Meanwhile, a lack of clarity around whether the contract for differenceregime will be sufficient to stimulate investment in new capacity in the UK sawthe country fall to eighth place on the index — its lowest ranking to date —and news that solar tariffs in Italy will fall away for new projects pushed thecountry down to 16th place.
Beyond Europe, Mexico continued its ascentin the rankings following the progression of its energy transition law, whichsets out a detailed roadmap for achieving the country’s ambitious renewablestargets, alongside its broader energy reforms. At the same time, Egypt re-joinedthe index for the first time in two years thanks to a new feed-in-tariff andauction system that provides greater clarity for project developers and demonstratesincreased government support for renewables.
“Due to the difficult macroeconomic situation and the uncertaintywith the "green tariff"Ukraine was pushed aside out of the top 40 countries with developing economies, which over the past six months have introduced advanced tools to support renewable energy sector,” says Kostyantyn Taranets, Senior Consultant of Cleantech and Sustainability Services,EY Ukraine.
Private sector supportfuels attractiveness
The burden for creating competition and attractingrenewables investment shouldn’t fall solely on the shoulders of politicians.The private sector has an important role to play.
Warren says: “Many markets are already attractingsignificant sums of capital and establishing robust project pipelines. Privatesector investors and developers can’t afford to be complacent. They must alsomake the effort to distinguish between real and perceived risks, and be moreproactive in establishing a tangible presence in their target markets. Ourfeature on Sub-Saharan Africa, for example, highlights how public perception ofthe region is changing from an emerging market in need of financial support toa commercial market in its own right. Energy developersand investors must get creative and competitive to secure a slice of such high-growthmarkets.”
Increasing levels of private sector engagement and thedevelopment of large-scale projects have helped a number of countries move upthe index, including Kenya, Morocco, Chile and the Philippines. The report’sfeature on the US-led Power Africa initiative also highlights how privatesector commitments of more than US$20b (in addition to US$7b US Governmentfunding) are being driven by high levels of economic growth and energy demandacross the region.
Looking ahead
Warren says: “Powering the future begins by achieving the right generationmix at the most affordable cost. Countries are moving away from a single sourceapproach and instead exploring how renewables fit within, or indeed dominate,their broader energy strategies. The low interest rateenvironment in more mature capital markets is forcing investors to look bothoverseas and at new sectors. The global renewable energy industry — and with itenergy consumers across the globe — can continue to be a major beneficiary ofthis trend as long as governments give investors consistency in policy andregulation over the longer-term. Greater collaborationbetween the public and private sector to ensure market reform measures are fitfor purpose will also likely become an important trend. Markets that adoptthese best practices will reap the rewards.”
Ksenia Leschinskaya, Partner, EY CIS Head of Cleantech andSustainability Services, comments on the situation in the CIS: “The CIScountries still hold low positions in the ranking. For example, Russia isfortieth among the 40 countries covered by the ranking. However, renewableenergy remains a promising sphere for development in the coming years.According to Russia’s Energy Strategy for the period up to 2030, renewableenergy facilities with a total capacity of 25 GW will be put into operation andthe share of electricity generated from renewable energy sources will increaseup to 4.5% of the total power balance. To achieve these objectives, a placementscheme of electric power facilities based on renewable energy sources will bedeveloped and regularly updated. Also, it will be necessary to create favorableconditions to attract investment in relevant projects. In addition to theabove, today we see rising interest in the development of renewable energycapacities and the establishment of an appropriate legal and regulatoryenvironment in Azerbaijan and Kazakhstan.”
To download thereport, visit: www.ey.com/RECAI
AboutEY
| EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,800 professionals work at 21 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan and Minsk). EY refers to the global organization, and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients. |
About the RECAI
The RECAI reportranks its 40 entries on the attractiveness of their renewable energy investmentand deployment opportunities, based on a number of macro, energy market andtechnology-specific indicators.
The index rankingstracks 40 markets worldwide: Australia, Austria, Belgium, Brazil, Canada,Chile, China, Denmark, Egypt, Finland, France, Germany, Greece, India,Indonesia, Ireland, Israel, Italy, Japan, Kenya, Mexico, Morocco, theNetherlands, Norway, Peru, the Philippines, Poland, Portugal, Romania, Russia,Saudi Arabia, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand,Turkey, UK and the US.
About EY’s Global Power & Utilities Sector
In a world ofuncertainty, changing regulatory frameworks and environmental challenges,utility companies need to maintain a secure and reliable supply, whileanticipating change and reacting to it quickly. EY’s Global Power &Utilities Sector brings together a worldwide team of professionals to help yousucceed — a team with deep technical experience in providing assurance, tax,transaction and advisory services. The Sector team works to anticipate markettrends, identify their implications and develop points of view on relevantsector issues. Ultimately, this team enables us to help you meet your goals andcompete more effectively.
