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China retains top spot in renewable energy market attractiveness ratings

WORLDWIDE: New targets to defer or cancel 106GW of coal-fired capacity, substantial improvement in wind curtailment rates, and a potential ban on internal combustion engine sales, make China the most attractive country for investment in renewable energy, according to new analysis published today.

China remains the most attractive renewables investment market, says EY report  (pic credit: Gamesa)
China remains the most attractive renewables investment market, says EY report (pic credit: Gamesa)

Solar PV is proving the main beneficiary with capacity in China increasing by 21GW in six months, Ernst and Young (EY) noted in its annual Renewable energy country attractive index (RECAI).

China also topped the analysts’ rankings for onshore wind and its offshore rating was second only to the UK, which received special mention for its second contract for difference (CfD) auction.

France, meanwhile, climbed to sixth in the RECAI, while Argentina, Morocco, the Netherlands, Turkey, Egypt and Portugal all saw their stock rise.

Turkey’s last tender awarded 1GW to onshore wind at 50% below the ceiling price and its PV capacity tripled in a year to 1.5GW, while in Egypt a feed-in tariff (FiT) system has resulted in 1GW of PV under construction, with more projected for next year, potentially under an auction system.

A decline in new investment this year due to grid overcapacity saw Chile slide two places to eighth, while Canada and Denmark both fell one place to 12th and 14th respectively.

India, the US, Germany, Australia, Japan, and Mexico were all also in EY’s top ten.

In India, doubts are growing about its ability to meet its 2022 target of 100GW of solar PV, while state-owned distributors cancelling power purchase agreements (PPAs) for wind power heightens this uncertainty, EY stated.

Despite having just one offshore project the US was ranked fourth in EY’s index for the technology behind the UK, China and Germany. (The technology-specific indices take into account potential level and incentive regimes as well as current and projected investment volumes.)

And in spite of Donald Trump withdrawing the country from the Paris Climate Agreement, the US held on to second place in the RECAI. This was largely due to bipartisan support for the renewable energy sector outside of Washington, and US renewables being decreasingly dependent on federal support.

Germany held on to fourth spot from last year, as the Bundestag outlawed below-zero bids for offshore wind tenders, following three successful no-subsidy bids in the country’s first offshore wind auction in April and 1.38GW of offshore capacity due to be operational in 2025.

Political instability in Brazil and developers bidding to terminate unviable contracts – including 308MW of wind projects and nine solar projects at a total capacity of 250MW – saw it fall from 15th to 17th place.

 

Blurred boundaries

When Ernst and Young launched the Renewable energy country attractive index in 2003, renewable energy was an "expensive, niche technology", finance leader at EY Global Power and Utilities Corporate, Ben Warren wrote in the foreword to this year’s report.

Fourteen years later, renewable energy is "in many countries, the largest source of new electricity generating capacity".

Looking ahead, he sees further growth as auctions replace feed-in-tariffs systems, countries and continents meet ambitious renewables targets, global energy storage capacity reaches 100GWh and electric vehicles (EVs) become cheaper than those powered by internal combustion engines.

"One measure of the sector’s success is the degree to which its boundaries are blurring," he wrote.

"As energy storage becomes cost-competitive, and digitization opens opportunities for disruption, the industry’s interaction with other sectors is creating an ecosystem that is more complex, interrelated and intriguing than we imagined possible 15 years ago.

This presents challenges for us to understand its emerging contours — but no shortage of opportunities as we build an economically efficient and environmentally sustainable energy system."

 

Projections to 2040

For the foreword to the report, Angus McCrone, chief editor of Bloomberg New Energy Finance (BNEF), was invited to predict changes in the renewable market.

He wrote that according to BNEF’s New Energy Outlook model, the levelised cost of energy (LCOE) for onshore wind was set to drop 47% by 2040, and offshore costs to fall even more rapidly – by 71% by 2040.

"These cost reductions will help drive enormous investment and faster penetration of renewables," he said.

"Wind and solar are already cost-competitive options for countries wanting to build new capacity: but by 2030, new wind and solar will also start to undercut the cost of generation from existing coal plants in some countries."

But McCrone warned that while renewable energy creates most jobs during manufacturing and construction, it also creates fewer than conventional generation during the operating phase.

He also warned that oil-producing companies would face a "dramatic reduction" in their tax base, as renewables increasingly proliferate the energy market.

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