LONDON — The global renewable energy sector held steady in the first quarter of 2013, as shown in the quarterly All-Renewables Index from Ernst & Young (EY). So far 2013 has seen few changes on a broad scale, but some interesting trends in many countries.
While policy uncertainty continues to put off investors worldwide and the economic crisis continues to bite, many nations are taking steps to address their problems, although we won’t see the effects for a while. Find the full report here.
China, in the lead once again, has announced ambitious capacity targets for 2013, pending legislation on national renewable energy quotas for grid companies and the strategic nature of its outbound investment in international wind and solar projects. EY points to the outflow of government-backed funds and manufacturing capability to other parts of the world – Latin America in particular – as indicative of a wider strategy to support the sector during this challenging period by “bundling” finance packages with Chinese equipment and broadening the country’s manufacturing base outside China. And EY cautions that, while this capital and capacity outflow might seem to indicate that domestic activity has been abandoned on the presumption of a saturated market, nothing could be further from the truth.
Germany remains in second place. While its government continues to be proactive in expanding grid infrastructure, approving the construction of three new “power autobahns” in Q4 2012, its announcement in late January that it intends to freeze the levy charged to consumers to cover the cost of renewable energy has caused consternation. The announcement included various measures to rein in support for clean energy projects and an accelerated timetable for implementation. The offshore sector, however, fared better, with new legislation unblocking stalled projects by creating greater long-term certainty.
The U.S.score remains unchanged overall. While the eleventh-hour extension of the production tax credit (PTC) and a number of offshore developments have given the wind sector a much-needed boost, EY warns that the government’s pullback from the “fiscal cliff” in the short term does not fully offset ongoing battles over long-term energy strategy and, in particular, the impact of cheap shale gas on the renewables market.
India‘s lead over France has narrowed. EY attributes this to concerns that poor trading performance on the REC market indicates broader issues around compliance with national renewables obligations. In the wind sector, ongoing uncertainty over the reintroduction of subsidies and tax breaks have continued to stall activity, although the generation-based incentive (GBI) was reinstated in the 2013-2014 budget shortly after the release of the Index and an upswing now looks likely. In the solar sector, EY found that a new government target and plans for a central government auction this year were partly offset by news that around half of the US$1.4 billion CSP project pipeline is likely to be delayed, and some may be scrapped altogether.
France held fifth place as its six-month national energy “debate” got underway. The discussion is expected to result in legislation setting out a clear energy strategy later this year. 2013 will also see important government auctions in both the offshore and solar sectors, with the country also doubling its target for installed solar capacity to 1 GW in 2013.
The U.K. remains neutral, finds EY, as policymakers continue to fail to provide the long-term certainty that the sector requires. While the latest draft of the Energy Bill did provide some additional clarity, EY believes that the delay of a de-carbonization target to 2016 and mixed messages about the future of the onshore wind sector threaten to result in investor apathy toward this market.
Japan has jumped ahead of Canada to take seventh place. While EY states that there are some underlying concerns that the re-election of the pro-nuclear Liberal Democrat Party in December could take the spotlight off the clean energy sector, it found that current levels of market activity – mainly driven by the attractive feed-in tariffs (FiTs) introduced last July – indicate that both the public and big business are fully behind the country’s renewables boost. In particular, the offshore sector took a giant step forward in Q4 2012, with the government announcing plans to construct a 1 GW offshore wind farm off the coast of Fukushima by 2020, with construction slated to start in July. And a 2.4 MW wind turbine sited 3 km off the coast near Choshi in Chiba Prefecture began to generate power in early March.
Canada has fallen a place in the Index. In Q4 2012 the country’s largest wind project, the 212 MW Gros-Morne wind farm in Quebec, became operational, and Japanese funding for GDF Suez’s wind and solar projects flowed in. But, EY found, these developments were overshadowed by the ruling that Ontario’s FiTs for clean energy producers that use local technology are in breach of World Trade Organization regulations. While EY believes that Ontario will likely appeal the decision, it says the ruling may well hinder the development of renewable energy in the province.
Italy has held its position at number nine. In December 2012 a sting operation in Sicily uncovered long-term Mafia involvement in the renewable energy sector. About a third of Sicily’s 30 wind farms and a few solar power plants have been seized by authorities, more than $2 billion in assets have been frozen, and alleged crime bosses, corrupt local councilors and Mafia-linked business people have been arrested. Italian prosecutors are investigating suspected Mafia involvement in renewable energy projects across the nation. In the last Index in mid-2012, Italy had replaced its green certificate scheme with reverse auctions for projects commissioned after 2012 in order to stimulate its stagnating renewables sector. EY found a lack of activity in the market combined with an unstable regulatory environment and a prolonged period of slow economic growth, dragging the nation down from seventh to ninth.
Australia has jumped above Brazil to take 10th place. Brazil saw few significant developments in Q4 2012, says EY, while Australia is becoming a preferred destination for Chinese companies and is now the second-largest overseas market for Chinese wind installations after the U.S. EY believes investors are also attracted by the AU$10 billion (€8.0 billion) Clean Energy Finance Corp Fund, which will start making loans in July, and by an additional AU$2.2 billion (€1.7 billion) program launched in late 2012 by the Australian Renewable Energy Agency.
Lead image: Engineers wind turbines via Shutterstock