Baseload, Bioenergy, Energy Efficiency, Geothermal, Hydropower, Solar, Wind Power

Uncertain Policies Deter Investors

Issue 1 and Volume 15.

A new KPMG report suggests that energy and power projects are set to offer the best investment opportunities for the construction sector over the coming year, with renewable energy inevitably playing a major part.

The company’s Global Construction Survey finds that the industry expects growth this year, yet economic uncertainty and government deficit or debt in some regions are still major concerns. Furthermore, a perceived lack of policies and leadership are seen as the biggest barriers to public-private partnership investment in infrastructure.

Richard Threlfall, UK head of KPMG’s infrastructure, building and construction practice, explains: “Amidst a global ‘energy crunch’ significant investments are needed in energy infrastructure to provide energy security at current levels and to allow for a low-carbon transition of our energy systems.”

Threlfall adds: “With austerity policies in many countries constraining the scope for public sector spending, it is vital to create an environment that encourages private sector investment.”

Indeed, the survey shows that economic uncertainty is still seen as the greatest systemic threat, with an overwhelming 80 percent citing concerns about governments’ ability to drive infrastructure spending and lack of official leadership as barriers to investment. Moreover, two-thirds of engineering and construction leaders believe that the private sector is not showing enough initiative, the company says.

This analysis of the construction market follows on the heels of the latest in the ongoing quarterly series of renewable investment country attractiveness indices from Ernst & Young.

According to this edition, China maintains its position at the top of the all-renewables index with the U.S., Germany, India and Italy leading the pack and the UK, France, Canada, Spain and Brazil finishing up the top 10.

The report observes that competition for limited capital and drive for increased efficiencies have combined to define the renewable energy sector over the past 12 months. As with KPMG’s analysis, the report says that investor hesitation has grown because of conflicting government policy signals, ranging from decreased FiTs to a drop-off in loan guarantees. But, at the same time, these same governments are struggling to overcome the dilemma of how to deliver secure, low-cost energy without impeding the market and while also creating jobs.

It seems that there are clear, if somewhat disturbing, conclusions to be drawn from these reports. Evidently the appetite for new energy infrastructure has, if anything, grown in the last year, and this trend is expected to continue and intensify as the move to a low-carbon world accelerates.

Simultaneously, with public sector finances largely in disarray, governments are consistently falling far short of the mark if their intention to drive private sector renewable energy investment is to be achieved.