China remains the most attractive market for renewables ahead of both India and the US, while the Middle East and North Africa are becoming increasingly important regions for clean energy activity, according to the latest global analysis from accounting services giant EY.
EY’s Renewable Energy Attractiveness Index was released yesterday, confirming China held on to the top position in the rankings having overtaken the US earlier this year thanks to its strong performance in the solar power and wind energy sectors.
In the wake of cancelling a number of coal power plant projects over the past year, China is aiming to spend at least $174bn on wind and hydro power over the next five years. The plans are part of a sweeping low carbon infrastructure strategy that has also seen the government work on proposals to ban new fossil fuel car sales in the country.
China has increasingly risen to prominence as a world leader on decarbonisation and clean energy, with the government actively working to cement its position as a clean energy hub following President Donald Trump’s decision to withdraw the US from the Paris Agreement.
As such, the US now lags behind China in third place in the EY rankings, with the consultancy noting that Trump’s rollback of Obama-era climate policies and trade rulings that could impact solar panel imports have dented the attractiveness of the market to global renewables investors.
However, EY notes that India’s second-spot in the list of 40 countries also “looks increasingly precarious” following cancelled wind energy power purchase agreements and steep falls in tariff bids in recent auctions, which it believes puts into doubt over the country’s 2022 target of having 100GW of solar PV installed.
Meanwhile, the election earlier in the summer of French President Macron – who has been vocal in his support for decarbonisation, renewables and the Paris Agreement – has helped push France two places higher to sixth position.
Chief editor of the Index Ben Warren, EY’s global power & utilities corporate finance leader, said the latest ranking showed government policy was pivotal in driving renewable energy development around the world.
“As it becomes increasingly clear that time is running out for legacy energy supply models, countries are vying for their place in a clean energy future,” he said in a statement. “Collaboration with existing suppliers and innovative partners through partnerships and acquisitions holds the key to success in this new world.”
Further down the rankings the UK maintains 10th spot, although the EY report highlights the success of the recent contracts for difference auction, which awarded over 3GW of offshore wind capacity at the historically low price of £57.50.
Other markets rounding out the top 10 for renewables investment attractiveness include Germany, Australia, Japan, Chile, and Mexico.
The biggest climbers in the rankings were countries in the Middle East and North Africa, where a surge in renewables activity and policy developments, financing deals and tenders have allo helped pull in investors.
In particular, the accounting firm highlights the International Finance Corporation’s approval of $635m funding in July for 500MW of solar projects in Egypt and Saudi Arabia’s invitation of bids for its first utility-scale 400MW wind farm project.
Warren said that with the right policy support, further cost reductions for renewables could be expected in the coming years, highlighting BNEF estimates that new wind and solar projects could account for 48 per cent of installed capacity by 2040, and 34 per cent of global electricity generation.
“While predictions should be met with caution in this changing landscape, the trend toward further technology cost reduction will likely drive enormous investment and faster penetration of renewables,” said Warren. “The onward march of renewable energy is also likely to generate employment, tax revenue and attractive returns for astute investors.”