The UK’s standing as an attractive destination for renewable power project investment has fallen to an all-time low, according to new market analysis.
EY’s biannual Renewable Energy Country Attractiveness Index, which takes the measure of 40 countries, was released this week. It found that uncertainty surrounding Brexit, closure of the Department of Energy and Climate Change and approval of the Hinkley Point C nuclear power project had together “dealt a sizeable blow” to the UK’s “already floundering” renewables sector, which now faces “an unknown future”. From number 13 in EY’s previous global index, the nation fell to 14, its lowest-ever ranking.
Other European countries, however, fared better after losing out to emerging markets in the previous index, with France (number 7), Belgium (18), Sweden (20), Ireland (30), Norway (32) and Finland (35) climbing in the rankings.
In France, upcoming tenders for 3 GW of solar power capacity and the start of work on a plan to pave 1000 km of French roads with solar panels could boost its solar capacity from the current 6.7 GW to 10.2 GW as early as 2018.
The top five countries – the US, China, India, Chile and Germany – maintained their standing in the table, although EY pointed to uncertainties surrounding the upcoming US election and Chile’s need to address transmission issues. Despite a record-setting power tender in which renewables won 52 per cent of the total capacity and a bid for a solar power project, the 120 MW Granja Solar plant, came in at a lowest-ever $29.1/MWh, EY said Chile will need to fix its transmission bottlenecks which have depressed wholesale power prices to unsustainable levels in some regions.
Indeed, EY identified grid integration as the most significant issue affecting countries’ renewable ambitions around the world.
Ben Warren, EY’s Global Power & Utilities Corporate Finance Leader, said that in Europe, countries’ “greatest hurdle is integrating renewables with historically centralized conventional power generation”.
“It began to look like European countries were scaling back their renewables ambitions as a result,” he added, “but, in recent months, we've seen promising new programmes materialize around the continent."
Among the emerging markets, Mexico, South Africa, Morocco, Argentina, South Korea and Indonesia rose in the rankings, while Brazil, Australia, Egypt, Turkey, the Philippines, Kenya, Jordan, Uruguay and Pakistan lost ground.
Much uncertainty remains for renewables markets around the world, EY found. In South Africa, despite a successful renewables tender programme, transmission constraints and a debate on the optimum energy mix have produced a “less certain” outlook for the renewables sector. In Brazil, political turmoil has produced market uncertainty, as has Egypt’s refusal to allow international arbitration clauses to be included in contracts, which has stalled project development. And Turkey’s plans to add coal-fired power capacity and its erosion of environmental regulation have also led to uncertainty.
While Warren noted that governments' appetite for renewables "remains undimmed, especially in faster-growing emerging markets," grid capacity issues mean that "all too often these successful tenders run into trouble".
"From China to Chile, via Germany, South Africa and many other jurisdictions, renewables have raced ahead of the capacity of the grid," he said. "Linking often remote project sites with demand centres, and managing the intermittency of wind and solar projects, requires substantial investment in transmission.
"This is the new paradigm in which policy-setters must act."
The full report is available here.