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For the first time in 4 years, the US is the most attractive country for renewables investment

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Experts in the renewables sector expect quick bounce back from the disruption caused by COVID-19

The renewable energy sector is expected to bounce back quickly despite the pandemic, as long-term drivers for investment remain strong, according to the 55th EY Renewable Energy Country Attractiveness Index (RECAI). This most recent index considers potential impacts of COVID-19, looking at resiliency of both health and economics of various countries.

For the first time since 2016, the U.S. has secured the top position in the index, largely due to a short-term extension to the Production Tax Credit and growth in offshore wind, with plans to invest $57 billion to install up to 30-GW by 2030.

China’s growth in renewables has slowed and, combined with the reduced demand during COVID-19, China has dropped to second in the index, but forecasters remain optimistic for long-term growth. France has moved up to third position, securing strong power prices and awards of 1.4-GW for wind and solar developers in its latest auction.

The UK, ranked sixth, made a milestone proposal to re-include onshore wind and solar projects in the next contracts-for-difference auction. Spain ranked eleventh, despite being hit hard by COVID-19, as climate and energy policy is a high priority for the country. Investors remain positive about Spain’s medium-term prospects.

The report also examines how large-scale energy storage is critical to decarbonize electricity systems, as well as the conditions needed to encourage investment in utility-scale battery storage. Electricity decarbonization results in increased energy storage and investments in large-scale batteries.

According to the report, 12.6-GWh of battery storage is planned to be installed this year. In the longer-term, a 13-fold increase in capacity growth, from 17-GWh to 230-GWh by 2025, is anticipated.

The report also shows that climate change and other environmental, social and governance (ESG) issues are increasingly important in determining a company’s future value creation potential. Institutional investors are demanding that businesses deliver financial performance as well as how they make a positive contribution to society.

As a result, companies are re-evaluating their corporate strategies to curb emissions, enhance governance and improve climate-related disclosures. This results in institutional investors increasing the capital they are allocating to renewables to hedge climate exposure, according to the EY.

Ben Warren, EY Global Power & Utilities Corporate Finance Leader and RECAI Chief Editor, says, “As a result of the pandemic, pollution levels have fallen dramatically through reduced fossil fuel consumption. A greater focus on a sustainable long-term energy future therefore works in favor of clean energy, in particular wind and solar, together with storage.”

Benoit Laclau, EY Global Energy Leader, says, “Stakeholders are looking to collaborate and invest in companies where climate change and sustainable development is embedded in their strategy. Energy leaders should take action to invest in renewables and related sustainable long-term projects, including energy efficiency, smart power networks and low-carbon transport infrastructure.”