Renewable energy country attractiveness index

In-depth perspectives

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Falling technology costs have accelerated globalization of the renewable energy sector and opened up new attractive markets. Yet these markets often have a track record of political instability or risky business environments, while otherwise attractive markets in more developed economies have increasingly been affected by high levels of policy uncertainty.

Risk mitigation products are available, however. We explore the role of political risk insurance in helping those investing in new markets, and the evolution of much-needed, yet highly elusive, policy risk insurance.

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As a fundamentally protectionist measure, domestic content obligations (DCO) have always attracted controversy. Yet their potential to generate energy sector jobs, boost GDP and create export potential continues to make them an attractive option for building alternative energy industries in new markets.

However, unclear objectives and a lack of industry understanding often lead to ill-designed or poorly executed DCO policies that distort or hamper the market. We explore lessons that can be learned from DCO experiences and its role in the policy toolkit.

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With the top five mining companies globally spending more than US$45b on energy last year, and continuous power supplies critical to the extraction industry’s operations, exposure to volatile energy prices and unreliable transmission systems is creating a hole in company profits. At the same time, renewable energy developers are looking for new distribution channels.

It seems obvious therefore to aim for a mutually beneficial union between a power-hungry extraction industry and an increasingly cost-competitive renewable energy sector offering fixed prices and increased energy security. Yet strategic partnerships, sophisticated solutions and a long-term commitment will be needed to turn this union into a gold mine.

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