China and the US have maintained their positions as the most attractive countries for renewable energy investment, while the UK moves up one place to fifth, a new report says.
The results of Ernst and Young’s latest Renewable Energy Country Attractiveness index mean little has changed at the top of the rankings since the previous quarter. Germany and India take up third and fourth places, respectively, and Italy is joint-fifth with the UK.
The Chinese government’s decision to tender for 2GW of offshore wind projects to reach its target of 5GW by 2015 solidified the country’s lead at the top. In the US, Ernst and Young says the Obama administration’s loan and grants programmes have helped support onshore wind and solar power to double-installation rate since the first quarter of 2010.
Meanwhile, the UK owes its rise to greater clarity around its planned Electricity Market Reform, especially with the confirmation of the Contracts for Difference feed-in tariff for low-carbon sources of power.
Germany also rose two places after launching a €5bn incentive scheme for offshore wind and announcing the end of its nuclear programme in the wake of the Fukushima disaster.
Lower down the table, Romania was the biggest climber, jumping from 21st place to 16th on the back of EU approval for its Green Certificate scheme, which is likely to stimulate significant investment in onshore wind development.
However, Ernst and Young expects the ongoing debts crises in the Eurozone and the US, as well as government austerity measures, will continue to have a significant impact on the financing of renewable energy projects.
Financing costs are likely to be forced up in the more vulnerable economies, although less exposed markets are returning towards more competitive funding terms, it says.
However, financiers may turn to infrastructure projects due to low returns on equities, according to Ben Warren, head of environmental finance at Ernst and Young.
“The cost of finance is proving reasonably volatile, with sovereign risk being only partly countered by increasing competition from lenders,” Warren said.
“Meanwhile, institutional capital, hitherto frustrated with underperforming equities markets, is increasingly looking at infrastructure, including renewable energy as a relatively safe haven to deploy their not inconsiderable funds.”
