The end of 2012 witnessed a host of projects under the major government-led procurement in South Africa reach financial close, while Morocco, France, India, Egypt and Argentina also announced various technology auctions, most due to take place in 2013.
However, the diminishing role of subsidies and other financial incentives should not be overstated. The resurrection of the US wind sector following the 11th-hour extension of the Production Tax Credit (PTC) and India’s ongoing anxiety as it awaits news on its own subsidies, highlight how pricing mechanisms can dramatically impact deployment. Indeed, there are still examples of countries relying heavily on subsidies to kick-start their renewables sector and, if Japan or Romania are anything to go by, it seems to be working.
Yet, previously strong markets such as Spain and Greece continue to fall in the index as a result of harsh measures to combat subsidy deficits. It seems that even Germany is being forced to reduce support in light of a proposed freeze on consumer surcharges. France, meanwhile, is using a six-month energy debate to take stock of its long-term strategy.
China, however, has found an innovative way to steer its renewables market through this challenging period of consolidation, grid constraints and protectionism. Increased domestic targets and outbound investment, often backed by the state-run China Development Bank, are helping to prop up the country’s clean energy sector, as Chinese companies pursue opportunities to bundle finance and equipment packages for projects in Latin America, MENA and Australia.
But significant barriers remain. Investment in infrastructure has become a recurring theme, with many countries — China, India, Germany and Denmark to name just a few — now battling with aging or capacity-constrained grids, as well as balancing issues from increasing intermittency as more renewables are deployed. It is therefore anticipated that capacity markets, such as those proposed under the UK’s new Energy Bill, and cross-border interconnections, such as the North Sea “super-grid,” will become increasingly important as a means of creating security of supply.
The other “obstacle” is the “g” word. Cheap gas in the US has caused debates worldwide on the cost-effectiveness of renewables, and many in the sector fear that a “dash for gas” in pursuit of lower capital costs could divert attention away from greener energy solutions. The lead article in this issue discusses this shale gas challenge, as well as commenting
on low carbon prices and nuclear rollout.
The Ernst & Young Country attractiveness indices (CAI) score 40 countries on the attractiveness of their renewable energy markets, energy infrastructure and the suitability for individual technologies. The indices provide scores out of 100 and are updated on a quarterly basis.The CAI take a generic view and different sponsor or financial requirements will clearly affect how countries are rated. Ernst & Young’s renewable energy advisors can provide detailed studies to meet specific corporate objectives.
Find the entire study in the attached pdf
