EY’s latest annual Index comes amid widespread concerns across the renewable energy industry that a failure to secure a Brexit deal could lead to further uncertainty for the power sector.
There is also uncertainty on a global level, as major renewable energy companies wait to see the long-term impacts of complex geopolitics, stated EY’s Global Power & Utilities Finance Leader, Ben Warren.
Even China, which ranks first place on the survey, is affected.
Warren said: ‘In China, this [uncertainty] has been exacerbated by decreased demand and moves to slow renewables growth, which creates a surplus of low-price solar panels.’
He added: ‘But while leading markets are reluctant to make moves in this climate, the inertia will likely be temporary as the renewable energy sector continues to mature.’
This year’s RECAI also shows little change across its top ten, due largely to political instability. China and the US remain in first and second position respectively, while India climbs one place to third position. Germany and France rank fourth and fifth places.
In China and the US, trade tensions between the two nations – including the US’ introduction of 30% tariffs on solar panel imports – see the two markets in a holding pattern.
The investment slowdown pattern is mirrored across the top ten RECAI markets, including India, whose progress towards a 100 GW solar target has been hampered by recent trade uncertainty, including a 25% tariff on solar cell imports.
In the UK, renewables investment for Q3 fell 46% year-on-year amid speculation around how the outcome of Brexit will affect power exports to the UK and the price of imported equipment.
However, oversupply will provide a short-to-medium-term boost to pricing competitiveness of renewables, while also likely to drive some consolidation upstream, adds Warren.
‘In the longer-term, rising demand for power from the heating and mobility sectors provides something other than trade disputes for policymakers to focus on,’ he said.
Less mature markets are also showing progress as they harness renewable energy investment and deployment opportunities. Argentina enters the top ten for the first time, thanks to growing government support for renewable energy, while Egypt rises five places to 15, with total wind capacity expected to grow 3.3 GW by 2027. Greece climbs from 34th to 28th position as the government aims to reach its 18% renewables target by 2020.
Faring less well is Sweden, which falls ten places to 32nd position, as the nation’s vast onshore wind resources are set to prompt future price declines for power and green certificates.
Rising electric vehicle (EV) usage and renewables technology advancement also feature prominently in the Index. With EVs set to reach price and performance parity with internal combustion engine vehicles from 2025, according to EY research, some investors are ‘hedging their bets’, adds the report. Alongside this rise, however, is considerable uncertainty around how quickly EVs will displace internal combustion engine vehicles, along with how usage of charging infrastructure will evolve.
Despite presenting numerous investment opportunities, particularly in relation to charging infrastructure, investors are cautious about an all-electric future, warns Warren, and the risk that over-investment could lead to heavy losses if utilisation falls short of expectations – or if the market changes direction, leaving investments stranded.
One of the major barriers to EV uptake in the UK is insufficient coverage offered by current EV charging infrastructure, states the report. However, this could potentially be offset by the government’s recent Budget announcement to extend the charge points capital allowance scheme – which allows companies that install charging stations a first-year tax allowance of up to 100% of the cost of the equipment – until 2023.