The renewable energy sector is entering a new phase of development without subsidies around the world, according to the 53nd edition of the EY Renewable Energy Country Attractiveness Index (RECAI). Mainland China and the US remain at the top two places in the ranking of the 40 most attractive markets in the world for renewable energy investments, while France climbs two in third place due to special attention to offshore floating wind capacities and doubling its targets annual expansion of shore-side wind capacity.
Other notable ups in the rankings were registered by South Korea (27th position with a 7th place) and Vietnam (the 26th position, with a climb of 17 seats), generated by their plans to build new renewable energy projects with a capacity of 4 GW and 475 MW, respectively. Norway (36th place with an increase in nine positions) and Finland (39th place with a three-position increase) are back on top of new planned investments supported by Direct Purchasing Power Contracts (PPAs) in an environment almost without subsidies.
Among the countries with declining developments are Mexico (the 19th place, a six-seater descent) and Taiwan (the 33rd place, a six-seater descent), which were affected by major political uncertainties.
"Romania can return to the map of the big investors in renewable energy with the increase in the competitiveness of the new equipment due to the rapid decrease of the production and installation costs globally," says Mihai Draghici, Senior Manager, Business Advisory Services, EY Romania.
Given that renewable energy is becoming an increasingly undeveloped sector, where projects compete on the market according to economic and environmental advantages, RECAI's latest edition analyzes two related features of this new landscape: the way in which projects are adapts to the new context of energy sales prices and market imbalances (commercial risk), as well as the increasingly important role of energy buyers in subscribing to green energy projects.
"Europe has paved the way for unsubsidized projects in areas with good renewable resources. Multiple projects in Scandinavian countries, the United Kingdom and Spain, are supported by private investment and PPAs that provide the necessary stability. For the renewable energy market in general, a future without government subsidies is one that will no longer be vulnerable to sudden policy changes or retroactive changes in promised tariffs. Also, in such a context, market forces impose discipline, promote efficiency and accelerate cost reductions that allow the industry to stand on its own feet, "said Ben Warren, EY Global Power & Utilities Corporate Finance.
Green energy purchases exploded last year, with more companies entering the market for the first time. According to the report, direct energy purchase contracts last year generated 13.4 GW of green energy, more than double the 6.1 GW in 2017.
The report also indicates that new companies and new countries are adapting to a renewable energy environment without subsidies. For many companies, the motivation to conclude PPAs is strictly economic, following contracts for ten years or more and long-term coverage of the risks of electricity price volatility. Other companies choose to purchase renewable energy for reputational reasons or to reduce their exposure to carbon emissions.
The index points out that in several countries, such as Japan and Indonesia, PPAs with developers are difficult because of regulatory barriers. However, more and more countries realize that investments in energy infrastructure should not come from taxpayers. In countries like Taiwan, corporate PPAs are now possible, while in other markets (such as France, Spain and Australia) the change in conditions has triggered an explosion in the volumes of direct energy purchasing contracts.
China's renewable energy market is undergoing a transition, as the government seeks to keep the cost of subsidies at bay. However, given the pollution concerns, the cost of technologies and the interest of international players, it is expected that the development of the largest green energy market in the world will continue.
"We continue to witness solid developments towards an all-electric future, thanks to the development of renewable energy sources and the use of electricity by end-users in a non-traditional way. We expect a sustained increase in demand for clean, carbon-neutral electricity that will encourage investment in new energy technologies, including battery storage and electric vehicle infrastructure, "said Benoit Laclau, EY Global Coordinator Energy.
A strong growth trend in the renewable energy sector has recently been recorded on the offshore wind segment, which has been a great success in Europe and is expanding more and more in other countries. While in Europe this segment will continue to grow significantly over the next decade, emerging markets for offshore windpower will include the United States, Mainland China, Japan, Taiwan and South Korea.