RECAI: Index highlights

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RECAI scores and rankings at May 2014

Index highlights

Although this issue sees no major shifts at the top of the index, there is a sense we are on the edge of a major realignment of the most attractive markets.

The gap between the US and China has narrowed again, suggesting China could return to the top spot. Signs of a more market-based approach in China could help break down barriers to foreign investment, and its scale of deployment remains unrivalled: the latest forecasts project almost 100GW of additional wind capacity from 2014 to 2018, and 60GW of solar, compared to 23GW and 33GW, respectively, in the US. Meanwhile, the US continues to battle tax credit uncertainty, though still offering significant opportunities.

Japan is becoming a strong contender for third place, with forecasts projecting as much as 36GW of new solar capacity by 2018, and Japan Wind Power Association estimating 144GW and 608GW onshore and offshore wind resource potential, respectively. However, the prominence of nuclear and absence of renewable energy targets in its recent energy plan have held it in fourth place.

A number of concessions tempering the latest renewable energy reforms have prevented a fall in the rankings for Germany.

The UK has slipped to sixth place, largely because of the threat of further reform of financial support for solar, just weeks after the Conservative Party voiced plans to scrap onshore wind subsidies if re-elected. While reduced support for large-scale solar will inevitably dent the 12GW of new capacity forecast by 2020, constant policy tinkering is more likely to drive investors and developers away from the UK renewables market.

A new auction program for utility-scale renewable energy in Ontario supports Canada’s move up into fifth place.

India’s surging energy demand and ambitious targets will prompt an estimated 15GW of new wind and solar capacity (each) by the end of 2018, suggesting a jump up the rankings is in sight. However, progress is being hampered by a subsidy payments backlog, controversial domestic content rules, and high financing costs.

France has leapfrogged Australia to eighth place. Clearance of a new wind FIT regime is welcome, after the previous decree was ruled out on state aid grounds after years of uncertainty. A forecast 4GW of new wind and solar capacity (each) and a target of 100,000 new jobs in the sector should also boost investment. In Australia, uncertainty over the Renewable Energy Target has left nearly US$1b in wind and solar projects in limbo.

Two power auctions planned for this year help Brazil climb into the top 10. Wind is again expected to dominate, but appetite for solar is growing rapidly, with 3GW–5GW of new capacity forecast.

The constant flow of project approvals and a proposed tax on carbon emissions in Chile has moved it up to 13th place.

South Africa’s latest procurement program announcements will boost an already expanding project pipeline, with forecasts of around 2.5GW of new wind capacity and up to 9GW of solar lifting it to 17th place.

Turkey and Mexico have also climbed the index, with high electricity prices mitigating overreliance on subsidies or policy exposure. Increased project activity has prompted an estimated 5GW of new wind power in both markets, and planned solar tenders in Turkey and geothermal capacity tenders in Mexico have also helped boost their rankings.

An absent solar market and the collapse of an agreement to export significant volumes of wind capacity to the UK has dramatically reduced Ireland’s deployment outlook, pushing it down to 32nd place.

In Kenya, the financing of Africa’s largest wind project has contributed to a two-place increase.

Political unrest and a weakened deployment outlook continue to push Ukraine down the index, though an energy supply imperative triggered by reduced imports from Russia could prompt a renewed focus on domestic renewable energy, helping it to hang on in 38th place.

Failing to recover from the exodus of investors and developers following severe subsidy reductions, the Czech Republic and Bulgaria have fallen out of the index. Slovenia also drops out due to limited investment and deployment activity, despite last year’s optimistic projections.

This has allowed the Philippines, Indonesia and Russia to jump into 35th, 39th and 40th places, respectively. A reliance on oil imports and Asia’s highest electricity prices have prompted the Philippines to target 15GW of renewables capacity by 2030. Meanwhile, Indonesia’s 247 million population has created significant energy demand growth and triggered a target of 25% of electricity from renewables by 2025. Both countries also have stable power offtake incentive regimes.

After a transformative 2013 for Russia’s renewable sector, which saw its first capacity auction and a 6.2GW 2020 target, the promise of a second auction in 2014 and reports of a possible carbon market to cut emissions indicate that diversifying its energy mix is more than a passing phase for the world’s largest country.