The Asian powerhouse has knocked the US off the top spot in the Renewable Energy Country Attractiveness Index (RECAI), which is compiled each year by consultancy EY and ranks 40 renewables markets on their attractiveness in the eyes of investors.
And while Germany, Japan and Canada maintain their positions in third, fourth and fifth respectively, India comes in at number six at the expense of the UK, which slips down the rankings.
Indeed, EY says the UK’s appeal as a destination for renewable energy investment “is now at its lowest level for almost five years as a result of a combination of domestic and international factors”.
The RECAI states that the UK “is currently weighing the impact of a recent consultation on solar subsidies that will see the UK government withdraw Renewables Obligation support for solar projects above 5MW two years earlier than planned. In addition, the government has already allocated the majority of the funding available to support renewable energy projects through to 2020.”
It adds that the UK and other established renewables markets are bearing the brunt of completion from emerging markets. “India’s new government is proactively overhauling its energy sector to galvanize public and private renewables investment. Brazil, Chile, South Africa and Kenya are developing robust deployment pipelines and consistent policy support, while major project financing in the Netherlands and Israel have prompted a boost for these markets.”
Ben Warren, environmental finance leader at EY, said: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market.
“The booming UK solar sector, one of only six markets globally to surpass the 5 GW installed capacity, was caught by surprise by the government’s consultation in May. Legal challenges and investor petitions have been launched in response, urging the government to give the sector more time and greater policy stability to compete with conventional fuels.”
He added: “At the same time there is simply not much left in the pot – 60 per cent of the funding available has already been allocated leaving investors and developers concerned about budgetary constraints for future projects.
“To continue to compete for international capital, the UK’s market reform and upcoming Contract for Difference regime will have to go a long way to repair the damage of recent policy mishaps.”
On China taking over at the number one slot, Warren said: “China’s government is placing increased emphasis on cleantech as the country battles pollution, ushering in new market opportunities for foreign investors. Aggressive policy targets, an increased focus on consolidation and the roll-out of pilot carbon emissions trading schemes also support the country’s pollution reduction initiatives and reflect cleantech’s strategic economic value.”
Warren warns that Europe “is currently at an inflexion point, striving to become a global sector leader but facing strained infrastructure and supply capabilities.
“The industry must liberate itself from the shackles of the past and go in search of grid parity as the fastest route to secure and affordable energy. The role of policy-makers therefore becomes one of enablement rather than support, and they should be looking to create a level playing field across all energy sources through greater cost transparency.”