China and India have overtaken the US as the top destinations for renewable energy investment in an influential report.
The Renewable Energy Country Attractiveness Index (RECAI) from analysts at EY ranks 40 countries in terms of their allure for clean energy investors.
The report identifies the US government’s executive orders to rollback many of the past administration’s climate change policies, revive the US coal industry and review the US Clean Power Plan as key downward pressures on renewable investment attractiveness.
Ben Warren, EY Global Power & Utilities Corporate Finance Leader and RECAI Chief Editor, said: “Movements in the index illustrate the influence of policy on renewable energy investment and development – both productive and detrimental. Supportive policy and a long-term vision are critical to achieving a clean energy future.”
In China, the National Energy Administration (NEA) announced in January that it will spend $363bn developing renewable capacity by 2020. This investment will see renewables account for half of all new generating capacity and create 13 million jobs.
China also plans to launch a pilot tradable green certificate programme in July for project operators to prove they have generated clean power and sell to consumers. The country has also committed to cutting greenhouse gas emissions by 18 per cent per unit of economic growth by 2020 under the Paris Agreement.
In recent years India has climbed the RECAI and it continues its upward trend to second position on the back of the government’s plan to build 175 GW in renewable energy generation by 2022 and to have renewables account for 40 per cent of installed capacity by 2040. The country has added more than 10 GW of solar capacity in the last three years having started from a low base of 2.6 GW in 2014.
Warren said: “The renewable energy industry is beginning to break free of the shackles that have stalled progress in the past. More refined technology, lower costs and advances in battery storage are enabling more widespread investment and adoption of clean energy.”
He added that economically-viable renewable energy alternatives coupled with security of supply concerns are encouraging more countries to support a clean energy future. Kazakhstan, Panama and the Dominican Republic have all entered the index for the first time.
The UK has climbed back into the top 10 after dropping to an all-time low of 14th place in the last report in October 2016.
But EY cautions that “the outlook for the industry remains cloudy amid a lingering lack of clarity around targets and subsidies”.
The RECAI says that the UK investment environment is more settled than recent years, which were beset by subsidy cuts, but the future post-Brexit remains uncertain. While the UK is behind schedule to meet its 2020 EU renewables target, coal-fired power has declined significantly and even reached zero for a day on 21 April.
Warren explained: “The UK’s reappearance in the RECAI top 10 is the result of other countries falling away – notably Brazil which cancelled a wind and solar auction in December – rather than any particularly encouraging resurgence.
“The UK continues to underwhelm investors who are waiting to see if future UK policy will support and encourage the renewable energy industry towards a subsidy-free environment, where consumers can benefit from the UK’s excellent natural resources for renewable energy.
“Investors are still waiting for clarity around the post-Brexit landscape. Question marks linger around renewable energy targets, subsidies and connections with mainland power markets. Unfortunately, the likelihood of getting complete answers to those questions before the UK exits the EU are slim.”
In April the UK kicked off the second round of renewable energy auctions for Contracts for Difference (CfD) subsidies. The government plans to allocate £730m of annual funding over three rounds, including £290m in the current round.
Warren added: “The CfD funding allocation is relatively modest and there is continued uncertainty around the outcome of the mechanism. In the absence of a buoyant CfD regime it’s difficult to see how the UK can force its way back among the front runners for renewable energy investment.”