The renewable energy industry is at a tipping point as the developed markets start to close the door on generous subsidy programs and emerging markets develop cost strategies to compete with fossil fuels, according to Ernst & Young’s latest quarterly global renewable Energy Country Attractiveness Indices Report, released October 29.
Gil Forer, Ernst & Young’s Global Cleantech Leader, comments: “Current global macro-economic drivers are reinforcing the role of emerging markets in the future global energy mix. As renewable energy technologies become more cost-competitive, the importance of government subsidies is set to decrease to create a sustainable growth platform for both developed and emerging markets, as well as manufacturers.”
The indices provide scores in 40 countries for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies. During Q3 2012, China remained at the top of the All Renewables Index (ARI), but dropped a point as its solar sector continued the consolidation process in an effort to boost domestic installation and rationalize government support, which could slow growth in the more immediate term. In recent months China has also seen a large outflow of Chinese investment in favor of markets such as Africa and South America.
The quarter also saw the US drop 1.5 points in the ARI, resulting in Germany moving up into second place ahead of the US. While the German government has recently increased the country’s renewable energy target for electricity to 40% by 2020 and is proactively implementing policy measures to create sustainable growth, the downgraded score reflects the more immediate changes around possible subsidy caps for solar, wind and biomass.
New investment levels have varied globally – with investment in Europe, Middle East and Africa rising 7% to US$21bn in Q3 – mainly driven by solar thermal and wind project financings in Morocco. However, in the same period, investment in the Americas and Asia-Pacific slipped by 25% and 3%, to US$10.4b and US$25.2b respectively.
When looking at the global outlook for the clean energy industry, Forer summarizes: “While the reliance on government subsidies is decreasing, it should not be forgotten that until “grid parity” is reached in more regions, financing will still depend on the timing and nature of individual countries’ incentives and support regimes, a commitment to invest in grid infrastructure and connectivity, and the ability of projects to seek multiple partnerships and investors.”
To download issue 35 of the Renewable energy CAI and previous issues, visit www.ey.com/CAI.