The US remains a non-mover in second place this quarter as the battle over the future of its clean energy policy continues. Utility scale solar (both PV and CSP) projects have remained healthy despite the uncertainty, but wind projects have suffered, particularly in the light of the continued suppression of gas prices in the US.
Ben Warren, Ernst & Young's Environment and Energy Infrastructure Advisory Leader and author of the report, explains: "The picture for renewable energy this quarter has undoubtedly been mixed. Global events have had a significant impact on attitudes to renewable energy, with increased impetus in favour of renewables in Japan, the Middle East and a number of developing economies. Despite some momentum being lost in Europe largely as a fall-out of the economic crisis, the need for countries to diversify their energy mix and deliver security of energy supply suggests a continued robust outlook for the market."
There are differing sector-specific indicators this quarter. Solar sector share prices appear to be weathering the current financial climate better than wind or biomass, gaining 40% since May 2010 despite the various feed–in tariff (FIT) reductions across Europe. Meanwhile, wind share prices have recently begun an upwards trajectory after losing 20% over the same period.
Gil Forer, Ernst & Young's Global Cleantech Leader, comments: "It is clear that the solar sector faces both challenges and growth opportunities. This is a good time for solar companies to continue to focus on cost reduction efforts, supply chain efficiencies, risk management and capital management."
Forer continues: "From a government perspective, it is important to overcome the misconception that renewable energy is too expensive, as we continue to see reduction in cost due to improvements in production and supply chain efficiencies as well as in technology. And as governments and corporations try to optimize their energy mix, solar will have a key role to play in any energy mix policy either at the country or corporate level."
Apart from Brazil, which − propelled by strong growth in its wind market − has risen four places to 12th position, most countries in the top 20 have dropped slightly in scores − largely as a result of diminishing incentives and restricted access to capital. India continues to slowly climb the rankings, overtaking Germany in fourth position, a sign that developers are favoring countries with high economic growth.
The lower half of the indices reveals several climbers and four new entrants, as the index expands to 35 countries. Morocco enters at number 27, on the back of strong solar and wind resources, and large increases in demand. Taiwan's solar supply chain and offshore wind potential are attractive for investment, while Bulgaria's and Chile's natural resources are being hindered in the short-term by policy barriers.
Japan has dropped three places in the rankings as the short–term focus on natural gas and fuel oil imports to replace lost nuclear power capacity is likely to hamper renewable energy investment. Longer term, the government has indicated that it will promote more renewable power.
In the UK, the results of the Department of Energy and Climate Change's (DECC) "fast track" review of FITs for solar PV has resulted in dramatic cuts for installations over 50kW, due to come into effect on 1 August 2011.
Ben Warren concludes: "The continued momentum in China and a number of developing markets promises to sustain overall growth in the sector, as the race for green collar jobs, energy diversity and economic growth continues. We might be seeing a temporary slowdown in investment activity as a result of declining levels of support for renewable energy in some markets, but cost reductions in some technologies an improved picture for the future."