According to EY’s latest 'Renewable Energy Country Attractiveness Index', the UK has dropped for the first time since December 2009 to the seventh place, a place that represents the lowest place in five years. Ben Warren, Environmental Finance Leader at EY, states that there is a ‘perfect storm’ of reasons for the drop, including the government’s decision to cut funding ahead of time, and the rise of emerging markets.
The 'Renewable Energy Country Attractiveness Index' (RECAI) is a global publication established in 2003 that is released on a quarterly basis by consulting firm EY. This index ranks 40 countries on the attractiveness of their renewable energy investment and deployment opportunities in the eyes of investors.
The latest edition of the index shows a significant reshuffle at the top, with China back on number one for the first time since May 2013, pushing the US to the second place. “China’s government is placing increased emphasis on cleantech as the country battles pollution, ushering in new market opportunities for foreign investors. Aggressive policy targets, an increased focus on consolidation and the roll-out of pilot carbon emissions trading schemes also support the country’s pollution reduction initiatives and reflect cleantech’s strategic economic value,” says Ben Warren, Environmental Finance Leader at EY.
The RECAI also shows that Europe and Australia are losing ground to emerging markets, with the UK falling to the seventh place, making way for India, and Australia switching places with Brazil, ending up on the 10th place. In the top 5, Germany (#3), Japan (#4) and Canada (#5) manage to hold their grounds.
Renewable energy attractiveness of the UK
For the first time since December 2009, the UK has fallen to the seventh place, and reached its lowest point in five years. EY indicates that declining budgets and political apathy have contributed to this. The government has decided to withdraw Renewables Obligation (RO) support for solar projects above 5MW two years ahead of its original plan and, on top of this, the government has already assigned the majority of its funding for renewable energy projects until 2020. The result: a cancelation of offshore projects.
EY states that UK’s position is not only threatened by domestic challenge; intensified competition and new dynamic emerging markets are also threatening UK’s ability to attract investors. India’s push to the sixth place was caused by the development of the new government of long-term energy strategy that galvanises public and private investment in the sector. Other emerging markets in the top 10 that are potential threats to the UK are Brazil and Chile, two countries that are developing robust deployment pipelines and consistent policy support.
Warren commenting on UK’s future position: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market. To continue to compete for international capital, the UK’s market reform and upcoming Contract for Difference (CfDs) regime will have to go a long way to repair the damage or recent policy mishaps.”