- Renewables are potentially a safer-haven for long-term investment
- Climate change and environmental considerations drive higher investment in renewables
- The US and Spain rise notably in the ranking, to #1 and #11 respectively
Despite the global slowdown caused by COVID-19, the renewable energy sector is expected to bounce back quickly as the long-term drivers for investment remain strong, according to the 55th EY Renewable Energy Country Attractiveness Index (RECAI). The latest index considers the potential impact of the pandemic, looking at the resiliency of countries in both health and economic terms.
The accompanying report highlights how climate change and other environmental, social and governance (ESG) issues are being increasingly recognized as key determinants of a company’s future value creation potential. Institutional investors are demanding that businesses not only deliver financial performance, but also show how they make a positive contribution to society. As a result, companies are having to re-evaluate their corporate strategies to curb their emissions, enhance their governance, and improve their climate-related disclosures. This has resulted in institutional investors increasing the capital they are allocating to renewable energy infrastructure as a means to hedge their climate exposure, according to our analysis.
“The transition from fossil fuel to renewable fuel units is also an economic necessity, not just a climatic one. Some fossil fuel production units in Romania have a total production cost of approximately 90 EUR / MWh, while renewable units in Europe have costs even below 50-60 EUR / MWh. Romania can benefit from the support of European institutions for defining the necessary mechanisms to relaunch investments in renewables ", says Mihai Draghici, Senior Manager, Business Advisory Services, EY Romania.
For the first time since 2016, the US has secured the top position in the index. This is largely because of a short-term extension to the Production Tax Credit and long-term growth in offshore wind, with plans to invest US$57b to install up to 30GW by 2030. China’s growth in renewables has slowed, as the government looks to wean the market off subsidies towards a more competitive landscape. This, coupled with reduced demand as a result of COVID-19, has caused China to drop to second in the index, but forecasts remain optimistic for long-term growth. France has moved up from fourth position to third, securing strong power prices and awards of 1.4GW for wind and solar developers in its latest auction, as it gradually weans its grid off nuclear power.
The UK, ranked sixth, made a milestone proposal to re-include onshore wind and solar projects in the next contracts-for-difference auction, encouraging greater and more diverse renewable energy development. Spain improved by four positions to rank eleventh, despite being hit hard by COVID-19, as climate and energy policy remains a high priority for the new coalition government. It has set out aggressive but achievable plans to increase wind and solar, and most investors remain positive about Spain’s medium-term prospects.
The report examines how large-scale energy storage is critical to decarbonize electricity systems, as well as the conditions needed to encourage investment in utility-scale battery storage. As electricity grids decarbonize, vast amounts of energy storage will be needed, and utilities and developers are slowly ramping up investments in large-scale batteries. According to the report, 12.6GWh of battery storage is planned to be installed this year, making 2020 a record year for energy storage growth. And in the longer-term, a 13-fold increase in capacity growth, from around 17GWh currently to 230GWh by 2025, is anticipated.
Benoit Laclau, EY Global Energy Leader, says: “This is a defining and transformative moment for the energy industry, despite the current crisis. Stakeholders are looking to collaborate and invest in companies where climate change and sustainable development is embedded in their strategy. Energy leaders should take action to invest in renewables and related sustainable long-term projects, including energy efficiency, smart power networks and low-carbon transport infrastructure.”
For the complete top 40 ranking, as well as an analysis of the latest renewable energy developments across the world, visit ey.com/recai.
About EY Romania
EY is one of the world's leading professional services firms with 284,000 employees in more than 700 offices across 150 countries, and revenues of approx. $36.4 billion in the financial year that ended on 30 June 2019. Our network is the most integrated worldwide, and its resources help us provide our clients with services allowing them to take advantage of opportunities anywhere in the world.
With a presence in Romania ever since 1992, EY is the leading company on the market of professional services. Our more than 800 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. In 2014, EY Romania joined the only global competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the national award represents Romania at the world final taking place every year in June, at Monte Carlo. The title of World Entrepreneur Of The Year is awarded in the world final. For more information, please visit: www.ey.com
You can view the report RECAI also in the document below: