Spain rated top country for renewables

LONDON, England, 2004-09-08 (Refocus Weekly)

Spain remains in first place for the attractiveness of renewable energy, according to a global assessment conducted by Ernst & Young.

“Spain's lead in the global index continues to be down to an attractive combination of a partially deregulated electricity market with strong tariff support, a positive planning environment and a high wind capacity target,” explains Jonathan Johns, head of the firm’s global renewable energy unit. “Unsurprisingly, many major European utility companies and PE houses are continuing their large-scale investment in the Spanish market and in particular wind power.”

The attractiveness index examines 19 countries and retains Britain in top spot as the most attractive national environment for wind power, and second in terms of overall renewable energy. Its attractiveness on wind declined due to public opposition to the technology and now is equalled by Spain, which outperformed the UK in terms of the potential for solar and biomass investment to retain the overall top spot.

"Since we last published the Index in June, the UK government has published details of its new planning policy directive which limits the ability of local planning authorities to withhold consent to future renewable energy projects,” explains Johns. “In addition, renewable energy targets for each region in the UK are a distinct possibility. Both initiatives should lead to a pick up in planning momentum.”

Spain is particularly strong in onshore wind, while the UK position depends on offshore windfarms, the support provided by the Renewable Obligation Certificates introduced last year and a recent hardening of 'brown energy' prices.

Solar power and other renewable energy sources in the UK continue to score poorly in the global index, but wave and tidal are beginning to be harnessed for commercial use. The government’s recent announcement of £50 million for wave power is “evidence that the UK is taking the sector more seriously,” explains Johns, and there is a “slow evolution from the R&D stage with a strong demand for venture capital to develop a test plant.”

The United States has gained a position in the wind rankings since the June assessment due to a ranking drop for Germany, but “a question mark hangs over the US as venue for renewable energy because of the uncertainty of the future of the Production Tax Credit.” If the wind credit is renewed following the November election, “the US may well take top spot in terms of both indices due to the largely deregulated electricity market, the wide availability of land and a favourable planning environment.”

"A great deal hangs on the PTC,” adds Johns. “If it is reinstated, EY are forecasting much higher levels of activity in the renewable sector in the US in 2005-06 based on the interest already shown by major utilities such as Excel in wind power; if it is not, the US faces a major drop in its position in the index."

Germany has dropped on the index since June due to “legislative bottlenecks and delays in passing tariff legislation to establish a major offshore wind pipeline, as well as problems with grid connection and the unfavourable environment for exploiting low wind speeds and a difficult financing climate,” although the report says it remains “a significant market with feed law tariffs.”

This is the sixth renewables index that Ernst & Young has produced since February 2003.

Since that time, “most major western economies have shown a decline in their overall attractiveness in terms of renewables,” with only Portugal, the Netherlands and Ireland improving their ranks. The latest results reflect the “continued slowdown in the developed markets brought about by regulatory bottlenecks and the emergence of new markets,” says Johns.

“Availability of conventional debt and equity finance remains a major constraint on the industry globally together with the movement from secure feed-in tariffs to more market driven mechanisms,” he adds. “Delivery is now a priority for the renewable energy industry as all eyes are now on its performance.”

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