China is still the most attractive market for renewables investment, despite facing significant supply chain challenges, while continued economic pressure has put the wider global renewables market “in a state of flux”, according to analysis by Ernst & Young.
China again topped the All Renewables index in the consultancy’s quarterly Renewable energy country attractiveness indices, ahead of the US. However, for the first time in recent quarters, the Asian nation failed to increase its score in the rankings, amid concerns its “meteoric” wind and solar growth path is unsustainable.
While China’s wind sector showed strong growth in 2010 and its solar industry is expected to benefit from additonal government subsidies, the consultancy highlighted concerns about supply chain challenges such as bottlenecks from weak R&D capacity, limited grid capacity and an imbalance in equipment production capacity.
Caution in Chinese stockmarket listings, falling stock prices and inflationary pressures were also factors in the country’s static index scorecard, the report said.
Meanwhile, the legacy of the global financial crisis continues to put pressure on the global renewable industry.
“Some countries and technologies are finding the economic conditions deeply challenging, leaving the market in an overall state of flux,” Ernst & Young said, noting a growing concern, particularly among developed countries, with getting value for money from renewables.
“The pressures to reduce national debt in developed countries, and control fiscal burdens on industry, consumers and taxpayers, are leading to a very keen focus on better value for money,” the report says. “This is supplemented by a renewed interest in carbon taxes and other fundraising devices – notwithstanding the desire to combat climate change and drastically lower carbon emissions.”
The renewables sector must engage in the wider low-carbon energy debate to ensure “it benefits from the incentives it needs and gives value for money to the various stakeholders”, the report adds.
US steady but uncertain, policies boost Turkey, Brazil
The US remains in second place on the All Renewables rankings and managed to climb one point in the index following the US government's extension of the 1603 Treasury grant programme for renewable energy until the end of 2011.
“The news is a sign that the US administration is prepared to take necessary steps to boost renewable energy development, even if it does come at the 11th hour. However, there is still some longer-term uncertainty,” the report says.
While US wind installation collapsed in 2010 to 5.1GW from 9.9GW in 2009, the report notes encouraging signs such as President Barack Obama’s target of 80% clean electricity by 2035, as outlined in his recent State of the Union address.
Germany and India maintained joint third position, while the UK remained in fifth alongside Italy, which rose from sixth position. Italy’s rise reflects its fourth quarter surge in solar photovoltaic installations – despite allegations of inflated installation figures – and the €600 million ($833 million) the European Investment Bank package awarded to Enel Green Power to fund renewables projects.
The Netherlands and Australia slipped two spots to 18 and 14 respectively, reflecting reductions in subsidies for Dutch renewables and Australia’s roll-back of solar support for householders and policy proposals that could restrict wind farm growth.
Turkey moved up one position to 27, buoyed by the approval of favourable renewable tariffs, while Brazil jumped from 18 to 16, boosted by a series of government commitments to ban additional fossil fuel power plants from 2014 and increase renewables incentives and grid capacity.
By. Charlotte Dudley
Source: Environmental Finance