Developing countries surge as attractive markets for renewables

Investors are increasingly focused on markets such as Chile, Mexico, Morocco and Egypt when looking where to bank on renewables. So says the latest edition of the EY Renewable energy country attractiveness index (RECAI) which says that emerging markets are surging ahead of European renewables powerhouses for energy investment attractiveness.

May’s edition of the quarterly index from EY, which looks at governmental policies and ranks countries based on their attractiveness for renewables investment, says that, almost without exception, European markets slipped down the rankings. In contrast, less mature markets across Latin America, Africa and Asia continued their ascent.

Emerging markets now represent half of the countries in the 40-strong index, and four African markets featuring in the top 30. This compares with a decade ago when only China and India were competing with more developed markets for renewable energy investment.  

Chile (rank 4), Brazil (6) and Mexico (7) climbed higher in the index top 10, while Germany (5) and France (8) fell in the latest ranking.  

Ben Warren, EY’s Global Power & Utilities Corporate Finance Leader and RECAI Chief Editor, said: ‘Last year, renewable energy investments in the developing world overtook those in the developed world for the first time. Latin America, in particular, has become something of a litmus test for how quickly markets can grow.’

Chile scores highly due to being one of the first markets to enable economically viable renewables projects to compete directly with all other energy sources. The report says Brazil’s renewables sector is showing surprising resilience amid an economic downturn and its underdeveloped solar market remains a potentially lucrative lure. And Mexico’s recent power auctions have opened the door to multi-billion dollar opportunities under a new liberalised energy market, says EY. 

The report says European countries have fallen in the index due to the scaling back of their ambitions as they address the challenges of marrying up increasingly mainstream renewables with a legacy of centralised conventional power generation.  

The US (1), China (2) and India (3) held their positions at the top of the index. Despite uncertainties around the US’ Clean Power Plan, it held the top spot following its five-year extension of federal tax credits for wind and solar.