Japan’s nuclear disaster and political unrest in the Middle East and North Africa have spurred momentum in the global renewables sector, but declining incentives and access to finance remain obstacles to growth, according to Ernst & Young.
The consultancy said the post-Fukushima nuclear backlash combined with uncertainty over oil supply following revolution in the Middle East and North Africa (MENA), prompted a rethink among many countries about the optimal energy mix and the role of renewables in electricity generation.
“While the link between solar and oil is less direct than between solar and nuclear – oil is used primarily as transportation fuel rather than for electricity generation like nuclear power – the energy security concerns raised by MENA instability have helped to energise a broader push for renewables, including solar,” said Ernst & Young’s John de Yonge and Thomas Christiansen, in the consultancy’s quarterly analysis that ranks the attractiveness of countries for renewables investment.
However, tightening government budgets and widespread reduction of solar incentives, particularly in Europe, tempered renewables growth, the report found.
“The picture for renewable energy this quarter has undoubtedly been mixed,” said Ben Warren, head of Ernst & Young’s energy and environmental infrastructure advisory team and author of the report.
“Global events have had a significant impact on attitudes to renewable energy, with increased impetus in favour of renewables in Japan, the Middle East and a number of developing economies. Despite some momentum being lost in Europe largely as a fall-out of the economic crisis, the need for countries to diversify their energy mix and deliver security of energy supply suggests a continued robust outlook for the market.”
The report also emphasised the importance attracting capital to grow renewables, noting that the sector is competing for funding “at a time when investment needs for other energy infrastructure are booming and … funding capacity from banks, corporates and capital markets is the lowest it has been in the past decade”.
China in top spot as India, Brazil rise up ranks
China retained its number one position on the 35-nation All Renewables index, boosted by increased support for offshore wind projects and the green credentials of its 12th Five Year Plan, released in March. While the report noted supply chain challenges, such as the limitations of China’s wind grid connection, the Fukushima disaster saw the country raise its solar capacity target from 20GW to 50GW by 2020.
The US was steady in second place, despite uncertainty over its clean energy policy, while India leapfrogged fourth spot Germany to occupy third place. India’s rise was due to favourable policies such as the removal of taxes on clean technology components, plans to introduce penalties for delays on solar installations and the start of trading in renewable energy certificates in March.
Italy remained fifth in the ranking while the UK dropped one place to sixth position, as a planned review into incentives sparked uncertainty in the solar sector.
Brazil jumped from 16 to 12, spurred by strong wind sector growth, anticipated renewable subsidy reform helped Poland climb from 16 to 14, while economic woes dragged Ireland down three places to share 14th spot.
Japan’s immediate post-nuclear crisis shift to natural gas and fuel oil imports has hindered renewables investment in the short-term, said the report, which downgraded the Asian nation three places to 18. However, government backing for renewables growth means it may bounce back in the long-term.
Morocco – which is targeting €8 billion in renewable investment by 2020 – pushed past countries including New Zealand and Austria to debut on the index at 27, thanks to its strong solar and wind resources and emerging grid connections. Taiwan, Bulgaria and Chile also joined the index for the first time.
By. Charlotte Dudley
Source: Environmental Finance