UK and Spain vie over top spot for renewable energy investment

The UK has held on to the top spot as the most attractive national environment for wind power investment, and came second only to Spain in terms of overall renewable energy in the sixth Ernst & Young renewable energy attractiveness index.

Spain came top of the 19 countries in the index by outperforming the UK in terms of potential for solar and biomass investment.

The UK held the top spot for wind due to changes in planning policy with the introduction of the PPS22 (see related story) which states that local and regional plans should include policies to encourage the use of renewable energy. In addition, regional renewable energy targets are looking increasingly likely. Both of these initiatives should lead to an increased momentum in planning.

Despite this, the UK’s score on the index has declined since last year. Johnathan Johns, from Ernst & Young’s global renewable energy unit, said: “The UK’s position is dependent on delivery of its offshore programme, the underpinning provided by the renewable obligation certificates (ROCs) introduced last year and a recent hardening of ‘brown energy’ prices.”

Emerging technologies like wave and tidal are also beginning to be harnessed for commercial use in the UK, the study found, making up for a poor scoring for such technologies as solar.

“The recent DTI announcement of £50 million for wave power is evidence that the UK is taking the sector more seriously (see related story). We are seeing a slow evolution from the R&D stage with a strong demand for venture capital to develop a test plant. However, biomass remains a problem area for the UK,” Mr Johns added.

In this, Spain tops the index again. Mr Johns put the country’s lead down to an attractive combination of a partially deregulated electricity market with strong tariff support, a positive planning environment and a high wind capacity target. “Unsurprisingly many major European utility companies and PE houses are continuing their large scale investment in the Spanish market and wind power in particular,” he said.

The USA gained third place in the index, overtaking Germany, due to its largely deregulated electricity market, wide availability of land and a favourable planning environment. However, the report makes clear that uncertainty over the future of the production tax credit (PTC) could keep the USA off the top spot.

“A great deal hangs on the PTC. If it is reinstated Ernst & Young are forecasting much higher levels of activity in the renewable sector in the US in 2005/06 based on the interest already shown by major utilities such as Excel in wind power. If it is not, the US faces a major drop in its position in the index,” Mr Johns explained.

The Ernst & Young Country Attractiveness Indices provide scores for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies. The indices are forward looking, hence the UK’s high ranking in the wind index is explained by the large amount of unexploited wind resource, strong offshore regime and attractive tariffs available under the ROCs system.

Conversely, although Denmark has the highest proportion of installed wind capacity to population level, it scores relatively low in the wind index because of its restricted grid capacity and reduced tariff incentives relative to its high installed MWs.

By David Hopkins

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