Renewed commitment in emerging clean energy markets bucks
policy uncertainty in more established areas
GLOBE-Net, June 6, 2012 - Following a record
year in 2011, investment flows in clean energy during Q1 2012 were
the weakest since 2009 according to Ernst & Young's latest
quarterly global renewable energy Country Attractiveness
Indices report (CAI) released recently.
China retains the top ranking
but falls a point amid concerns that wind sector growth is stalling
as the grid infrastructure catches up with impressive recent
growth. A boost in installations in the solar sector is expected as
the focus becomes more domestic, using excess panels in the supply
chain. The scope for increased foreign investment in the sector
will likely be limited in the short term though.
The US continues to suffer
from political wrangling, the electoral cycle and uncertainty
around its long-term energy strategy. The expiry of key funding
programs at the end of 2011, and the PTC for wind projects' pending
expiry at the end of this year have left its renewable energy
sector in limbo. All of this has produced a two-point drop in the
Germany also drops a point but
retains third-place. To cope with a high rate of new solar
installations, the Government has brought forward further FIT cuts
and introduced more frequent reductions. Germany's offshore wind
sector also faces significant challenges connecting to the
Canada has dropped a point
following Ontario's intention to reduce premium rates for wind and
solar power in a two-year review of a program covering
The short to medium term global sector outlook is generally
downbeat as the ongoing problems with Sovereign debt issues and
increased competition from Asian manufacturers continues to focus
the minds of European policy makers and the growth in shale gas and
political resistance to tax credit extensions continue to pose
significant challenges to the US market.
However, as more mature technologies move ever closer to grid
parity with traditional energy sources, there is good reason for
longer term optimism for the global renewable energy sector.
The indices provide scores in 40 countries for national renewable
energy markets, renewable energy infrastructures and their
suitability for individual technologies. While the rankings at the
top of the index remain unchanged, all five of the top ranking
countries have dropped points during Q1 2012.
Italy has also fallen a point
following the release of two decrees that would slash solar
subsidies by 35% and those for most other renewable technologies by
The UK and France remain
in sixth position with no overall score change. The UK's solar
sector received a blow following the Department of Energy and
Climate Change's proposals for further FIT cuts. The renewable
energy sector as a whole, and offshore in particular, received a
boost from plans for significant spending programs to improve the
transmission infrastructure for renewable energy source projects.
The UK's marine sector also saw a flurry of activity in Q1.
Gil Forer, Ernst & Young's Global Cleantech Leader,
explains: "The growth of China's wind sector continues to be
stifled by insufficient access to the grid, while a boom-bust
scenario appears to have returned to the US as a result of
uncertainty over the expiry of key stimulus programs. In Germany
and Italy, tariff cuts and grid challenges have reduced short-term
attractiveness, while the end of a key tax break incentive in India
is likely to dampen wind sector growth through 2012.
The Country Attractiveness
Indices publication has been running since the beginning of
2003 and is distributed to over 4,000 people each quarter. It
provides scores for national renewable energy markets, renewable
energy infrastructures and their suitability for individual
"The news is more positive in other parts of the index, with
several countries including Mexico and Chile announcing new
national targets for clean energy generation or reaffirming
government support through incentive schemes."
In contrast to all other countries in the top10, Japan bucked
the trend in the established markets by increasing its CAI score,
following an announcement of favorable feed-in tariff (FIT) levels
to encourage additional investment from July 2012.
M&A activity increases despite continuing difficult
Globally, an estimated US$21.7b worth of renewable energy
transactions were completed in Q1 2012, representing a 41% increase
on Q4 2011. In particular, biomass and energy from waste sectors
transaction volumes were up 40% on Q1 2011.
For global IPO markets, it was the poorest quarter on record for
renewable energy since Q2 2009 with approximately US$14.3b raised
from 157 issues, which is down by approximately 69% compared with
Q1 2011. New asset finance also fell sharply, undermined by
wavering political support and a continuing lack of liquidity in
the project financing market, resulting in only US$24.2b raised in
Q1 2012. This represents a 30% decline on the previous quarter and
a 7% decline for the same period in 2011.
Looking forward Ben Warren, Ernst & Young's Energy and
Environmental Finance Leader, comments: "The next 12 months are
likely to be characterized by further consolidation in the solar
and wind supply chain, with a large number of outbound deals
expected from Asia. Access to capital will remain the single
biggest differentiator for companies in both the technology and
infrastructure markets for the foreseeable future."
Businesses implement pro-active energy mix strategies to
mitigate rising energy costs
To look at the impact on businesses, Ernst & Young
commissioned a global survey of 100 US$1b-plus companies operating
within energy intensive sectors to identify the key strategic
issues they faced at the C-suite level. With 38% of respondents
expecting energy costs to rise by 15% or more in the next five
years, energy efficiency, increased usage of renewable energy and
growing energy self-generation are the themes driving corporate
energy mix strategy discussions.
While reducing energy costs through energy efficiency measures
is often the foremost objective of an energy strategy, a number of
other subsidiary goals are also driving strategy, such as energy
security, carbon reduction, and price stability; with regulatory
compliance and reputational aspects also playing a part.
As the largest global corporations tackle the challenge of
transforming to a low-carbon and resource-efficient economy, a
variety of technologies are being deployed to achieve energy
efficiency objectives including energy demand management (47%),
building energy management systems (20%), energy-efficiency
lighting (18%) and building automation (18%).
Forty-one percent of respondents also reported generating some
form of renewable energy with company-owned or controlled resources
such as solar, wind, or bioenergy. However this practice is not yet
widespread with only 11% of respondents reporting that clean energy
accounts for more than 5% of their companies' total energy
On the renewables contribution to energy generation, Forer
comments: "In contrast to company-owned generation, 68% of
respondents purchase some amount of electricity generated from
renewable sources but only 39% of all respondents would be willing
to pay a premium for renewables, highlighting the importance of
achieving grid parity and developing innovative project financing
Warren adds: "The main barriers to self-generation and
renewables adoption are mainly related to risk and financial
return, suggesting that adoption could come even faster with
financing innovations and increasing cost-competitiveness of
renewables. Only those businesses with a comprehensive and diverse
energy strategy will be able to create and maintain competitive
advantage in the resource-constrained world of today."
The Indices publication is available