A new set of indices developed by Ernst & Young, the Near-Term Index, looks at market attractiveness over a two year period. It shows that the UK is trailing in fifth place behind Spain, the US, Germany and India, as a renewable energy investment location.

“The near-term index reveals a clear gap between the promise and reality in the UK’s renewable energy market,” said Johnathan Johns, head of renewable energy at Ernst & Young. “In the next two years the UK needs to deliver MW’s both on the ground and in the sea. As the US flexes its market power, manufacturers’ attention and time is being diverted at a time when capacity is constrained – further impetus is therefore vital for the UK market.”

The UK was previously one of the most attractive spots for renewable energy investment according to the same analysts (see related story).

However, the top four markets – Spain, the US, Germany and India – now have in excess of one gigawatt forecast for installation to December 2006, while the UK has only 500 to 750 megawatts anticipated.

In addition, a recent DTI consultation highlighted ambiguity around the economics of offshore electricity generation.

“The UK’s position in the new Near-Term index is lower because of this ambiguity, as the timetable for many second-round offshore projects is likely to slip into the medium-term horizon,” Johns added. “Certainly the development of first-round offshore projects was considerably assisted by the availability of capital grants and some help is likely to be needed for second-round offshore ones as well – with the cost of offshore grid a key issue.”

“If the economics for second-round offshore are not improved then some key projects may face difficulties gaining investment,” he warned.

India is predicted to be a market to watch in the near and long-term. A GW of growth over the last year has established India amongst the top markets with total installed capacity currently running at more than 3.5GW.

Looking beyond wind, Ernst & Young predict the biomass industry to be the next likely focus for investment in the medium-term.

David Hopkins

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie