In the latest edition of its quarterly Renewable Energy Country Attractiveness Index (RECAI), consultancy EY predicts that the next 12-18 months will see the traditionally-dominant European countries lose market share to emerging nations.
It highlights Ethiopia, Kenya, Indonesia, Malaysia and Uruguay as the countires most likely to muscle-in on European markets which have limited growth potential.
EY predicts “troubled offshore markets” in the UK, Germany and the Nordic region will find their dominance challenged by China, Japan, Taiwan, South Korea and India, while Brazil is forecast to cement growth not just in its wind sector but also in its nascent solar market.
As this is the first RECAI of 2014, EY uses it as an opportunity to reflect on 2013 and highlights its choice of winners and losers in the renewables sector.
Among the winners are South Africa, which last year financially closed its second round of renewable projects; Brazil; Chile, which has approved 9.9 GW of projects; Turkey, which is seeing growth in its solar sector; Japan and China.
The losers were largely European, with the exceptions being India, which is failing to build on its renewables potential due to infrastructure and trading mechanism issues, and Australia, which saw a renewables policy U-turn following last September’s election.
But is it Europe that is suffering the most according to EY, particularly the traditionally-dominant sectors in Germany and the UK.
EY says that Britain is “in a spin” because of “a combination of prolonged policy uncertainty, less-than-welcome news that mature technologies must compete for contracts for difference [part of the government’s new energy market reforms] from day one, and a series of offshore wind project cancellations”.
Ben Warren, EY’s environmental finance leader, said: “The UK’s fading appeal is the direct result of the lack of clarity on the government’s long-term energy strategy at a time when energy security is a concern and investors are looking for commitment.
“Recent announcements around contracts for difference have been perceived by some investors as a risk to investment stability, for onshore wind in particular, given the regime changes and subsidy cuts already planned. At the same time, the UK offshore sector has also taken a battering, with a number of high-profile projects being mothballed in recent months.”
However, Warren added that “we need to keep reminding ourselves that the UK market has proved itself to be the most resilient compared to other big European markets in the past”, but stressed that “the UK government and the renewables sector need to work together to regain investors’ confidence and realise the UK market’s potential”.
Nina Skorupska, chief executive of the UK’s Renewable Energy Association, said the UK’s waning appeal was not surprising. “Investors are already looking at projects post-2020 but they have no clear steer from the EU or the UK government that they see a major role for renewables once the existing 2020 targets are met.”
Greenpeace UK deputy political director Joss Garman said: “This damning report lays bare the economic cost Britain is paying for the government’s internal squabbling and foot-dragging on clean energy. Investors demand certainty, but what ministers have offered them is double-talk and mixed messages. As other major economies like the US and China are embracing clean tech and reaping the rewards by attracting investment, the UK is failing to capitalise on its position as a world leader in green tech.
EY states that Germany’s renewable market “took a battering in 2013, with September’s election prolonging discussions on how best to curb rising energy prices.
“Calls to reform the feed-in tariff programme in February 2013 and ongoing rhetoric about ‘affordability’ were not translated into policy statements, making developers and investors nervous and contributing to a staggering 46 per cent fall in new investment.”
EY said that 2014 “will determine its long-term attractiveness as the new coalition’s policy plans become clearer”.
In terms of trends for the global renewables sector in 2014, Warren said “efficiency and effectiveness need to be this year’s buzzwords”.
“The market should be setting its sights on value chain integration, consolidation on a global scale, repowering, transaction and capital efficiencies and technology improvements.
“Renewable energy is now a truly global market, and stakeholders must develop a global strategy and a global supply chain, be flexible to market changes, and be willing to go in search of new markets.”
He added that deployment challenges in China, Japan, Germany and South Africa in 2013 highlighted the need for more robust transmission infrastructure and efficient distribution channels.
More resource and investment is required in grid management, digitalised supply and demand management, distributed applications and the commercialisation of storage technology, if the sector is to address transmission bottlenecks and intermittency challenges.
Warren said: “Innovation in non-generation infrastructure and technology will not only drive efficiencies and boost deployment, but also represents a significant investment opportunity across both developed and emerging markets. The digitalisation of energy in particular will create a revolution that will have significant social, economic and environmental impact.”