The UK, however, slips from first to third place in the long term index and to fourth in the near term. Its offshore sector is at "make or break" point, warns E&Y. High turbine prices and equipment shortages, plus today's uncertainty over grid costs and Renewables Obligation Certificates (ROC) prices beyond 2015 are serious challenges, it says. Germany remains in fourth place, although E&Y warns of political uncertainty following the election.
Meantime, with high wind power installation rates anticipated, India is the main mover in the index, rising to fifth place. E&Y points out that wind is competitive in India due to high energy prices and the high cost of building conventional power plant. "As countries such as India start climbing up the indices it is the emerging markets that will become the new hotspots for renewable investment," says E&Y's Jonathan Johns. "And with the US also flexing its muscle, the world is becoming an increasingly competitive place. Capital and investment -- of which there is no shortage -- is starting to move to the most attractive regimes with increasing speed."
UK hard hit
The UK government's decision not to extend the obligation on retailers to buy ROCs beyond the current target of 15% by 2015 is squeezing the industry, says Johns. "It is difficult for generators to obtain contracts to sell electricity for more than ten years without providing large discounts on prices, which makes securing finance harder."
The impact on offshore wind projects has been particularly bad, he says. "Offshore wind already faces rising costs from manufacturers and high grid connection costs, but now the sector could struggle to secure project financing due to cash flow uncertainty beyond 2015." Ironically, a side effect of slowing the momentum on renewables in Britain will be an increase in power from old coal and oil plants which have become more economic with the rise in power prices. This means the prospects for the UK in the short term may be an increase in greenhouse gas emissions, he says.
The solution for renewables would be an increase of just 1% per year in the RO beyond 2015 up to 2020; this would safeguard long term investment, believes Johns. But if increasing targets is politically unacceptable, dealing with the issue of who should pay for transmission reinforcements for wind power is perhaps the most effective way government could accelerate developments, he says.