China Remains Most Attractive Country for Renewable Energy Development

China’s decision to quadruple its solar capacity target to 50 gigawatts (GW) by 2020 along with growing uncertainty over energy policies in the US and key European countries make it the most attractive location for clean energy projects, according to the latest quarterly analysis by Ernst & Young.

China stayed at the top of the firm’s latest Renewable Energy Country Attractiveness Indices report, followed by the US and Germany. Those two countries tied for second place on the index, which ranks 40 countries based on their national renewable energy markets, renewable energy infrastructure, and suitability for individual technologies.

Clean energy investments in China during Q2 rose a stunning 92% from the first quarter, while investments across all of the countries in the ranking rose 24% to $59.6 billion. Most investments financed construction of new projects. 

New investments rose 18% in the US and 11% in Europe.

While China’s clean energy future is by no means in the clear, in particular because of its ongoing trade disputes in the US and Europe, its future is less uncertain than many of the other countries ranked by Ernst & Young.

The US stays in second place because of uncertainty over the future of the renewable energy production tax credit (PTC) and because of the increasingly fossil fuels oriented political landscape, which would be cemented if Mitt Romney prevails in the upcoming election.

Germany is tied with the US. "While the US and Germany markets are level within the [index], the contrast between these two markets is evident," says Gil Forer, leader of Ernst & Young’s Global Cleantech practice. "The upcoming elections have led to an understandable slowdown in the decision-making process in the US, while Germany is pushing ahead with its ambitious renewable energy agenda — including the introduction of a new solar PV tariff and compensation for offshore grid connection delays."

India, which is rethinking its policy in the aftermath of the world’s biggest power outages in July, slipped to fourth place because of difficulties in attracting private investment to update its power infrastructure. Its position should improve as companies such as First Solar build their domestic presence.

Despite dropping a bit because of uncertainty over future support for its wind subsidies, the UK rose to fifth place on the index. Japan also rose a spot on the list, because of its heightened commitment to renewable energy after the Fukushima nuclear catastrophe.

Here’s the complete Top 10:

  1. China
  2. US/Germany
  3. India
  4. UK
  5. France
  6. Italy
  7. Canada
  8. Japan
  9. Brazil
  10. Australia

Challenging market conditions were reflected in a 50% decrease in the value of renewable energy deals in Q2 2012 compared with Q1, reports Ernst & Young. During the quarter, many major utilities continued to "rationalize" their portfolios, disposing of non-strategic assets and businesses.

"The Q2 slowdown in transaction activity and deal values may only be temporary," says Ben Warren, financial leader for Ernst & Young’s Energy and Environmental practice. "For H2 2012, an increase in outbound Chinese activity is expected, with solar technology companies and wind sector original equipment manufacturers (OEMs) looking to access new markets through the acquisition of development portfolios."

For the complete Ernst & Young report:

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