Britain is top spot worldwide for renewable investment

Britain has gained the overall top spot as the most attractive national environment for renewable energy investment according to the latest Ernst & Young 'Renewable Energy Country Attractiveness Indices.

Spain, the sole leader in Ernst & Young’s previous studies, has experienced a slight increase in market risk, analysts say, while the UK’s pricing regime is becoming more and more attractive.

Jonathan Johns, head of Ernst & Young’s global renewable energy unit, said the renewable obligation (RO) was one of the key reasons for improving Britain’s ranking.

“As wind projects pass through the development process, they are set to generate attractive economic returns for investors due to the ratchet mechanisms of the RO to 2015, which is increasing competition among the UK suppliers to secure renewable obligation certificates (ROCS). Hence the suppliers are offering more attractive long term power purchase agreements (PPAs), both in terms of contract duration and the floor price of contracts.”

Mr Johns explained that Spain’s score had declined ever so slightly as the market mechanism it has in place means there is now an increased risk that revenues will fall below the fixed tariff. Despite this, the report shows that Spain still offers excellent market prospects especially as the government is due to expand its wind capacity for 2011 by 50% to 20GW.

Elsewhere on the list, the USA remains an attractive market for long-term investment in renewables, while Germany holds on to its fourth place. However, the report points out that there appears to be a shortage of attractive development sites inland and that public opinion in support of continued onshore installations is waning.

France and Portugal came out as the best improving European markets. They both benefit from a better wind resource than Germany and have rapidly improving planning environments with Governments who are beginning to actively encourage renewable energy investment.

In addition to the established markets, the index measured China and India for future renewable energy investment. China has set ambitious targets for wind power development and will next year introduce legislation to encourage renewable generation.

However, as Johns comments: “Until larger international players establish manufacturing facilities in the country, something that is beginning to take place, the need to import the bulk of components means a relatively high cost of development.”

Mr Johns also sees consolidation in the sector as inevitable: “As project sizes get bigger, more professional asset management and larger investment are required. As a result we are seeing institutional investors beginning to enter the market and build international portfolios.”

By David Hopkins

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