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  • 1. May 2009 Issue 21 Renewable energy country attractiveness indices In this issue: Global highlights The US remains top in the All renewables index and stretches its lead to four points. Overview of indices: issue 21 ................................2 The European nations have benefited from the European Economic Recovery Plan as well as announcements from the EC that one-third of Cohesion Policy funds will target a Country attractiveness ‘green economy.’ These announcements have driven a rise in infrastructure scores across indices survey........................3 the affected Member States. Managing renewables The Indian government has announced a new target of 10% renewable energy within its through the recession ............4 energy mix by 2012. This, along with rises in tariffs for wind and solar, both photo voltaic and concentrated solar power, have bolstered India’s position near the top of the table. Issue highlights......................6 The UK budget has boosted the near-term position of the UK due to the positive impact All renewables index it will have on offshore wind in the near term. However, the rises in banding will only be at May 2009 .......................10 in place to varying degrees for projects which place new orders for turbines in 2009-10 Long-term wind index and 2010-11. This could lead to many projects pushing for faster development to ensure at May 2009 .......................11 orders are placed within these windows but may have limited impact on projects which are further from completion and which may struggle for financial viability at the 1.5 ROCs/ Country focus – US, MWh rate (post 2011-12). Germany, China, Spain, Following this, the UK has fallen below Italy in the All renewables index. Italy’s score India, Italy, UK, Poland .........12 was enhanced following receipt of significant European funding, however recent media Near-term wind index allegations of corruption may undermine this market’s score in the future. at May 2009 .......................19 This issue sees a revision to the Solar index, to reflect the increasing role of CSP Offshore wind, marine generation. Changes to weightings in the index have seen overall rises in solar score for and tidal focus .....................20 countries such as the US, Spain and India which have strong CSP potential, while some countries such as Germany and France have seen drops in overall score reflecting their Feature – solar indices weaker potential for CSP generation. at May 2009 .......................21 In the near-term index, revised forecasts have seen the US rise as the reduction in forecast Commentary — capacity for 2009-10 was not as great as expected. However, it is still well below its peak in guidance notes ....................23 Q4 of 2007. Glossary ..............................27 We would like to thank all those who took the time to respond to the recent country attractiveness indices survey. Please see page 3 for initial results. Company index ....................26
  • 2. “Ernst & Young was ranked the leading project finance advisor in the Americas, Europe, Middle East and Africa between 2001 and 2008 by Project Finance International” Overview of indices: issue 21 The Ernst & Young country attractiveness indices provide scores Renewables infrastructure index for national renewable energy markets, renewable energy This provides an assessment by country of the general regulatory infrastructures and their suitability for individual technologies. infrastructure for renewable energy (see page 10). The indices provide scores out of 100 and are updated on a regular basis. Technology factors The main indices (all renewables and long-term wind) are referred These provide resource-specific assessments for each country to as the long-term indices. The near-term wind index takes a (see page 10). two-year view with slightly different parameters and weightings (see right). Long-term wind index The country attractiveness indices take a generic view, and This index is derived from scoring: different sponsor/financier requirements will clearly affect how countries are rated. Ernst & Young’s Renewable Energy Group can • The onshore wind index – 74% provide detailed studies to meet specific corporate objectives. It • The offshore wind index – 26% is important that readers refer to the guidance notes set out on pages 23 to 24 when referring to the indices. Near-term wind index The near-term wind index takes a forward-looking two-year view Long-term Indices based on the parameters of most concern to a typical investor The long-term indices are forward-looking and take a looking to make an investment in the near term. The index gives long-term view, hence the UK’s high ranking in the wind index, scores for onshore and offshore separately. For parameters and explained by the large amount of unexploited wind resource, weightings see page 24. strong offshore regime and attractive tariffs available under the Renewables Obligation mechanism. Conversely, although Denmark has the highest proportion of installed wind capacity to population level, it scores relatively low because of Comments and suggestions its restricted grid capacity and reduced tariff incentives. We would welcome your comments or suggestions on any aspect of the indices. Detailed attractiveness surveys All renewables index and market reports can be provided taking account of specific corporate objectives. This index provides an overall score for all renewable energy technologies. It combines individual technology indices as follows: Please visit our website or contact either: 1. Wind index – 75% (comprising onshore wind index and offshore wind index) Ben Warren, Partner 2. Solar index – 10% (comprising solar PV index and solar CSP index) Andrew Perkins, Director 3. Biomass and other resource index – 15% Dane Wilkins, Account Director Individual technology indices These indices are derived from scoring: Arnaud Bouille, Director • General country-specific parameters (the renewables infrastructure index), accounting for 35% Enquiries to the Guest Columnist Jonathan Johns should be addressed to • Technology-specific parameters (the technology factors), accounting for 65% 2 Renewable energy country attractiveness indices Issue 21
  • 3. Country attractiveness indices survey During April and May 2009 we asked our readership for your Frequency of publication thoughts on the current content, the relevance to the market, Frequency of publication your information requirements and how we can develop the content to meet your evolving needs for the future. Initial results from the survey indicate the most popular sections in the country attractiveness indicies are the country focus pages Responses and the all renewables index. Favoured section Ad-Hoc: Bi monthly Half yearly Quarterly as significant changes develop We are analysing the feedback from our survey and will incorporate the results in future issues of the country attractiveness indices. We would like to thank everyone who kindly completed All renewables index Market highlights: M&A activity the survey, and would welcome any further feedback you Country focus pages Others may wish to provide. Issue articles Renewable energy country attractiveness indices Issue 21 3
  • 4. Managing renewables through the recession Jonathan Johns, Guest Columnist Notwithstanding renewables’ favorable long-term investment backdrop, supported by the twin drivers of climate change and the security of energy supply, the credit crunch and ensuing recession has had, and is likely to continue “The need for more to have, a marked effect on the sector: robust cost-effective • Borrowing terms have tightened considerably with a flight to mechanisms from quality where funds are available. Cross-border lending has become more challenging. a tax payer and • Chronic capacity shortages and bottlenecks have been replaced consumer perspective by overcapacity and job losses, particularly in the solar PV is likely to emerge as manufacturing sector and also in wind. a critical issue.” • Oil majors have announced either withdrawal or retrenchment from previous headline investments in the sector as they slash capital budgets in their core businesses. By late 2008/early 2009, many projects worldwide had been put on hold until the support packages were announced. US wind • Bloated P/E ratios have fallen considerably. turbine projects are only now starting to recommence following • The days of inexorable profitable growth are over. Some of the 30% treasury grant alternative to the PTC. those purchasing projects at the height of the boom have UK offshore projects are only just receiving the go-ahead suffered significant asset write-downs with some overgeared following an overhaul of the ROC regime, increasing income distressed purchasers selling assets at below cost. for projects squeezed by declining income and rising costs. • It is welcome that the fiscal stimulus packages put in place Arguably, these welcome measures are only temporary palliatives. by the majority of OECD countries include a strong renewables The US PTC/ITC structure has been demonstrated as overreliant component. Governments have recognised green jobs as a on a narrow investment sector and, in the UK, the improved key area of growth as economies prepare themselves for a ROCs for offshore wind will largely be taken up by existing or post-recession low-carbon era. soon-to-be announced projects with incentives declining to previous uneconomic levels in the relatively short term, leaving Stimulus room for uncertainty. The need for more robust cost-effective as a mechanisms from a tax payer and consumer perspective is likely Energy % of 2007 (US$m) Renewables Grid efficiency GDP to emerge as a critical issue as cost savings rather than stimulus spending becomes a government imperative. US 32,780 11,920 41,000 0.62% Germany 631 130 18,330 0.58% Even with the new packages in place, continued retrenchment is likely with further withdrawals and consolidation in the offing. China – 70,000 100,495 5.20% In the solar PV sector in particular, capital calls are likely across India 1 0.00% all sectors, even by the strongest players as they seek to fund restructuring or capacity building for the next phase of growth. Spain – 163 – 0.01% Capital and debt markets are likely to have only a limited appetite Italy 1,369 143 2,757 0.20% for such calls and the flight to quality is likely to continue, putting UK 1,001 72 815 0.07% pressure on new innovative businesses. The stimulus measures should allow growth to recommence preferably on a more France 617 5,550 530 0.35% sustainable basis. Compared to many other sectors, such as Canada – 790 730 0.11% construction, the renewables sector will look favorable. Source: Ernst & Young For those with cash there are, and will be, considerable 1. India has supported its green economy through the introduction of new tariffs showing a differing approach. investment opportunities. It is worthwhile considering the environment that renewables face in the coming years as we A comparison of investment in terms of GDP is salutary as in enter the stimulus phase of the recession and prepare for some cases the rhetoric is stronger than the investment, with recovery and a new era of growth. The timing of investment China and the US powering ahead and other countries reeling in will be critical and will depend on a view of when the crossover their wake (see the table above). point for the particular market is likely to occur. It is important to emphasise that each market is different as is each sector due to the multiplicity of mechanisms in place and the different stages of technology maturity. 4 Renewable energy country attractiveness indices Issue 21
  • 5. Economic growth and its affect on energy consumption is a key driver of carbon emissions. It is ironic that the recession is likely to prove the most effective device to date in cutting emissions, “Value for money is likely to and the impact has been a rapid reduction in the price of carbon, become increasingly critical demonstrating the volatile nature of that marketplace and confirming the need for capacity-building renewable incentives for renewables.” as well as cap-and-trade polluter-pays mechanisms. The extent to which carbon becomes fully priced in the economy is likely to have a fundamental effect on the speed of growth of the renewables sector and its profitability. This can be achieved either by way of trading (the preferred route to date) or by way of taxation, a route likely to be increasingly tempting to depleted government treasury departments. tonnes saved. Real declines in output costs per kWh and improved The West is unlikely to be able to fund, given the high levels of reliability will be demanded of all technologies. This is likely borrowing, support mechanisms at current levels for indefinite to lead to increased globalization of the technology supply periods of time. There will be considerable pressure to reduce chain with China having, in all probability, secured a competitive them once the economy starts growing again, and it will be foothold, if not advantage, as its own deployment has continued important that by this time the green jobs sector should have largely uninterrupted. For the West, the race for new technologies gained its own momentum to help justify the long-term economic is likely to become an increasing imperative but only if they case for renewable investment. provide cost or output advantages in the medium term. Blue-sky technologies will need to be transformational to Investment in grid and energy efficiency have been recognised command government support and equity resource as there as every bit as important as investment in renewables: indeed, will be many other short-horizon investment opportunities. in the next few years, these markets are likely to be at least as significant as renewables if not more so, and from an investor The credit crunch and the recession give the industry time perspective have increasing appeal as a new, but in some ways to make some tough decisions and to emerge stronger. It is less risky, ‘kid on the block’. It also should not be forgotten that fortunate to have significant government support to allow it to fossil fuels are likely to attract investment dollars as there is no accomplish this but should probably realise that post-2015 the clear pricing of carbon yet, and opportunities in the short term state may be seeking to wean itself off the mechanisms currently may improve as prices could again spike when growth recurs. in place in favor of more direct measures focused on making the polluter pay. This will provide economic advantage to the industry, Value for money is likely to become increasingly critical for providing it is by that time prepared for that new era. Those who renewables as it becomes a mainstream solution, both in terms seek to rely wholly on existing business models without adapting of straight economic cost and in terms of price per carbon them may find their viability challenged. Ernst & Young conceptual framework for navigating a renewables business through financial crisis Phase A: Phase B: Phase C: Phase D: Phase E: Phase F: Pre-financial crisis Financial crisis, Stimulus Post-stimulus Recovery Restored growth €/MWh pre-stimulating Carbon Price (€/tonne) €30 €10 €10-15 €20 €25 €30 or €25 €35 or €20 Oil Price ($/barrel) $140 $50 $60 $70 $80 $90 $100 Revenue Drivers Carbon price Financial incentives Scenario: Brown power price Factors impacting timing of cross-over point: • Carbon price • Technology economics • Nature of support regulations A • Length of recession • Length of Financial Crisis Revenue Value gain • Availability of credit or high profits B Value Value gain impairment or higher margins or low margins Cross Cost over point Cost drivers “Cross-over Point” Capacity levels Scenario A: Increased carbon price and technology costs falling Commodity price Scenario B: Consumer resistance to higher prices and taxes Technology efficiency Length of recession? resulting in greater tariff dependency and reducing financial incentives. Lower carbon price. Cost of funds 2005 2006 2007 2008 March 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 Time Phase C - “Stimulus period” ends 31/12/2010 Phase D – “Post-stimulus period” ends 31/12/2012 • Debt markets static Aggregate revenue • Debt markets free up • US Capital Grants Aggregate cost • Pre EU - ETS phase 3 • German accelerated depreciation • European Investment Bank projects • UK offshore wind at 2 ROCs per MWh (until 31/03/11) • M&A increasing • Investment opportunity due to low prices Renewable energy country attractiveness indices Issue 21 5
  • 6. Issue highlights Equity markets Wind, Solar and Biomass stock indices are based on a selection of 35 public companies listed in a variety of countries. (A March Stock and indices since March 2007 2007 baseline is used.) Stock prices have shown a slower decline since the sharp drop Apart from the solar sector, renewables indices have shown a seen during Q3 and Q4 2008: degradation in position relative to the March 2007 baseline. A gradual decline in the Utilities’ stock values has continued Renewable energy and indices performance while oil prices appear to be stabilizing, showing a slight uplift from December 2006 to March 2009 on the January position. 4.0 Comparing share prices at the end of March 2009 with those at the end of October 2008 paints a slightly different picture: Solar prices have fallen 20%, while wind prices have actually 3.0 risen by 2%. Meanwhile biomass prices have fallen by a further 7%. The disproportionate solar correction is thought to be due to over-valuations in early 2008 and late 2007. Additionally, the Spanish tariff cut last September and degression of the 2.0 German tariffs at the beginning of this year have led to excess capacity in the solar sector. This, combined with a drop in silicon prices (leading to lower margins for manufacturers) has meant 1.0 that some production capacity has had to close or combine to ride out the recession. 0.0 P/E ratio performance by RE sector Dec-06 Sep-07 Jun-08 Mar-09 P/E ratios have continued their steady fall from the unsustainable FTSE Biomass (Ernst & Young) heights of late 2007, when average solar ratios were almost 160 and wind was around 110. In the Q3 2007 Country NEX (WilderHill) Utilities (Ernst & Young) attractiveness indicies issue we warned that, “Price-earnings Wind (Ernst & Young) Crude oil data of solar companies shows values of internet company levels, Solar (Ernst & Young) HSBC climate change index although many of these companies are at an early stage and hence their valuations may be exaggerated.” Indeed, ratios have Source: Ernst & Young subsequently dropped sharply for solar and wind companies, and now typical values range from about 27 for solar to 18 for wind Volatility is still apparent due to uncertainty regarding the scale, and 11 for biomass. scope and impact of financial recovery packages which have been steadily announced throughout the latest quarter. During March 2009, renewable stocks generally rallied slightly, together with P/E ratios the rest of the economy, however talk of ‘green shoots’ may be 200.00 premature in the near-term. End October End January End March 2008 2009 2009 150.00 NEX -47% -51% -52% HSBC Climate Change -40% -38% -44% Index 100.00 Wind (Ernst & Young) -40% -29% -38% Solar (Ernst & Young) +69% +60% +49% Biomass (Ernst & Young) -62% -61% -69% 50.00 Utilities -14% -24% -36% Brent crude oil +15% -30% -25% 0.00 Source: Ernst & Young Dec-07 Jul-08 Feb-09 Wind Solar Biomass Source: Ernst & Young 6 Renewable energy country attractiveness indices Issue 21
  • 7. Issue highlights (cont’d) Share price performance by RE sector Since the sharp price correction downwards last September/ In general, large solar companies appear to be performing October, the wind sector has been fairly level over the last few significantly better than their smaller competitors, and the sector months despite cuts to growth forecasts. Several prominent is holding up despite a drop in solar module prices across Europe. energy companies have scaled back their commitment to wind In the US, strong demand is maintaining module and share prices. power, including FPL, Shell and Iberdrola; however, the larger, better capitalized, and more established OEM wind players are currently weathering the downturn better than smaller suppliers, Solar share prices although job losses have been common to both. Reduced turbine 2.50 prices and increased financial incentives in a number of countries (especially the US) may lead to growth sooner than expected. 2.00 Wind share prices 1.60 1.50 1.40 1.20 1.00 1.00 0.50 0.80 0.60 0.00 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 0.40 0.20 Small cap Big cap 0.00 Jun-07 Jun-08 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Source: Ernst & Young Dec-06 Dec-07 Dec-08 The biomass sector has continued its gradual fall in stock market pricing, that began back in early 2007. Both large and Small cap Big cap small companies alike have been impacted by the difficult market conditions that have persisted. Source: Ernst & Young Biomass share prices Recent flotations 1.20 The performance of several companies which were floated late 2007/early 2008 looks to have turned a corner. After some large 1.00 drops from initial valuations, firms such as Iberdrola Renovables, Xinjiang Goldwind, and EDP Renováveis have recovered since minima around late October 2008. This may offer signs of hope 0.80 for those companies which delayed their IPOs during the financial crisis. 0.60 0.40 0.20 0.00 Jun-07 Jun-08 Sep-07 Sep-08 Mar-07 Mar-08 Mar-09 Dec-06 Dec-07 Dec-08 Small cap Big cap Source: Ernst & Young Renewable energy country attractiveness indices Issue 21 7
  • 8. Issue highlights (cont’d) Recent flotations Bord Gais Eireann has acquired Sorne Wind Limited from HgCapital Renewable Power Partners Fund. Sorne Wind has Relative price generating capacity of 32MW. 4.00 RWE Renewables Polska has acquired a 30% stake in Park 3.50 Wiatrowy Suwalki Sp zoo, a Warsaw-based owner and operator of wind farms, from Polish Energy Partners SA, for 6.5 million Polish 3.00 zlotych (US$1.753 million). Concurrently, RWE also acquired a 30% stake in Park Wiatrowy Tychowo Sp zoo. 2.50 Mainstream Renewable Power has signed an 80:20 JV 2.00 with Canadian wind farm developer Alberta Wind Energy Corporation (AWEC), to build an initial portfolio of over 400MW 1.50 of wind energy plants with a combined potential investment 1.00 value of US$850 million. 0.50 EDP Renováveis Brasil has acquired Windfarm Elebras Cidreira, a Cidreira-based owner and operator of wind farms, from 0.00 Innovent GmbH, for 6.2 million reais (US$2.7 million). As a result Jun-08 Sep-08 Mar-08 Mar-09 Dec-07 Dec-08 of the transaction, EDP has secured 532MW of wind power. DONG Energy has acquired the 51MW Karcino wind farm in Iberdrola Renovables EDP Renováveis Poland from Aktiv Wind, a company owned by bankrupt Xinjiang Goldwind developer EuroTrust. The wind farm is expected to commence operations in 2010, and the overall construction budget totals Source: Ernst & Young around DKK600 million (US$100 million) including DONG Energy’s cash purchase price for the shares, provisionally calculated to be DKK38 million (US$7 million). M&A Utilities Solar Italian utility Enel is looking at a possible capital increase of First Solar, Inc has agreed to acquire a solar project €5 billion – €8 billion to curb its financial debt, including possibly development business from OptiSolar Inc., the US-based putting its renewable energy assets up for sale. This is planned manufacturer of solar panels, for an approximate equity for June pending authorization and market conditions. consideration of US$400 million. The acquisition includes a 550MW solar development project, which is already under a German utility EnBW and Turkish industrial company power purchase agreement with Pacific Gas and Electric company Borusan Holding intend to form a JV in order to build 2GW of (PG&E) (see page 12); a project pipeline of additional 1,300MW; power capacity in Turkey during the next 12 years, much of it and certain related land rights of approximately 136,000 acres. renewable energy. Nippon Oil Corporation has acquired a 31.2% stake in Space Energy Corporation, the Japan-based producer of solar cell silicon Wind wafers, for a consideration of JPY3 billion (US$29.7 million) CLP Holdings Limited has acquired the Chinese wind farm increasing its interest in the company to 46%. portfolio of Roaring 40s Renewable Energy Pty Ltd., the Australia-based renewable energy producer, for a consideration of National Semiconductor Corporation, the listed US-based US$94.17 million. The acquisition is in line with CLP’s strategy to developer of analog and mixed signal semiconductors has expand its operations and increase its renewable energy capacity acquired Act Solar, the US-based provider of solar power by 122MW to over 1200MW. Post acquisition, in Australia, optimization solutions and products, for an undisclosed Roaring 40s will continue to operate as a 50:50 JV between CLP consideration. The transaction is in line with National and Hydro Tasmania and develop wind projects. Hydro Tasmania Semiconductor’s strategy of expanding its portfolio of power is also planning to sell its share in Khandke Wind Farm, based in optimization technologies, by using Act Solar’s technology for India, for an estimated US$11 million. monitoring solar arrays with its SolarMagic product line. CLP has also won an auction to acquire a 32% stake in China HgCapital Renewable Power Partners Fund has acquired a Guangdong Nuclear Wind Power Co Ltd. from China Guangdong controlling stake in three Spanish solar PV plants, from AIG Nuclear Power Group (CGNPG) for a consideration of CNY 1.04 Financial Products Corp. The consideration represents an billion (US$152.36 million). enterprise value of €300 million, with a total output of 35.4MW. 8 Renewable energy country attractiveness indices Issue 21
  • 9. Issue highlights (cont’d) Mitsubishi Corporation has signed an agreement with Acciona Hydro S.A. to acquire a 34% equity interest in its subsidiary Amper Statkraft has agreed to acquire a 95% stake in Yesil Enerji AS, Central Solar S.A, the developer and operator of the 45.8MW the Turkey-based energy company, from Global Yatirim Holding solar PV project in Amareleja, Portugal. AS. Yesil Enerji holds controlling interests in seven hydropower Nord/LB and Bremer have joined forces with three other investors projects, with a combined installed capacity of 633MW and an to finance a €160 million solar facility in Brandenburg. The 53MW annual generation capacity of 2.1TWh. facility will be constructed by juwi Holding AG and First Solar. Restructuring White Owl Capital AG has bought a 1.7MW solar park in Spain located near the village of Castuera, from IBC Solar AG, a Bad Vestas have recently announced the closing of the Isle of Wight Staffelstein-based owner and operator of solar plants. turbine plant with the loss of 450 jobs as part of a headcount reduction program which sees 1,900 jobs being cut. Fotowatio Renewable Ventures, Inc. has agreed to acquire the renewable energy business of MMA Renewable Ventures LLC The slowdown of the PV industry has seen job cuts in solar cell from its parent company Municipal Mortgage & Equity LLC for a manufacturing across the globe as demand and hence price for consideration consisting of US$19.7 million. cells drops. China, Spain and the US have borne the brunt of these impacts. Siemens has acquired a 28% stake in Italian solar company Archimede Solar Energy (ASE) for an undisclosed price. The Spanish PV industry has recently taken significant job losses Siemens intends to provide capital for quickly expanding with the Asociación de la Industria Fotovoltaica (ASIF) reporting production capacities, with an option to acquire a majority in between 10,000 and 15,000 redundancies. ASE in the mid-term. BP has announced the closure of solar panel production sites in Maryland and Madrid. Biomass and biogas Deutsche KWK GmbH agreed to acquire a 38% stake in Pro2 Anlagentechnik GmbH for €3.6 million (US$4.6 million). RWE Innogy and the Westphalia-Lippe Agricultural Association have signed a cooperation agreement to construct and operate biogas plants which are run almost entirely on liquid manure. Present planning documents state the commencement of construction for the first pilot plant in Münsterland (district of Borken) is scheduled for September 2009, with commissioning envisaged in spring 2010. The plant is designed for 9MWth and could feed an annual 60GWh of biogas and 8GWh of electricity into the public gas grid. Geothermal For an undisclosed consideration, Max Weishaupt GmbH, the German heating and cooling equipment manufacturer, has acquired a majority stake in BauGrund Süd Gesellschaft für Geothermie mbH, the German company specializing in drilling and exploration of near-surface geothermal energy. Marine Singapore-based Atlantis Resources, a developer of tidal turbines, has said that it raised US$14 million in funding. Norway’s Statkraft led the round, joining existing backers including Morgan Stanley, the largest shareholder of the company. Renewable energy country attractiveness indices Issue 21 9
  • 10. All renewables index at May 2009 All Onshore Offshore Biomass/ Infra- Rank1 Country renewables Wind index wind wind Solar other Geothermal structure2 1 (1) US3 70 71 75 58 73 63 67 68 2 (1) Germany 66 67 66 71 65 64 60 64 3 (3) China 63 67 71 55 46 54 58 64 4 (4) India 62 63 70 42 61 56 43 60 5 (5) Spain 61 62 67 46 67 54 36 65 6 (7) Italy 59 59 64 46 64 55 65 64 7 (6) UK 58 63 61 67 38 56 35 61 8 (9) France 57 59 60 54 53 57 28 58 9 (8) Canada 54 59 63 45 32 46 30 58 9 (10) Portugal 54 56 61 43 51 45 33 58 11 (10) Ireland 52 57 58 57 28 47 27 60 12 (13) Australia 51 51 54 43 57 46 60 55 12 (10) Greece 51 53 57 42 56 42 33 55 14 (14) Sweden 50 52 52 51 35 55 34 52 15 (15) Netherlands 46 49 50 49 37 40 21 42 15 (16) Poland 46 49 53 39 34 41 22 46 17 (16) Denmark 45 48 45 54 32 45 32 50 17 (16) Belgium 45 50 48 55 28 35 26 47 17 (19) Norway 45 48 49 45 24 44 30 49 20 (20) Brazil 44 44 48 34 40 46 20 41 21 (21) New Zealand 42 46 50 36 25 33 43 41 21 (21) Japan 42 44 46 38 43 33 38 45 21 (23) Turkey 42 43 46 36 40 36 42 44 24 (24) Austria 34 31 41 0 43 47 35 48 25 (25) Finland 33 33 32 35 20 47 22 33 Source: Ernst & Young 1. Ranking in issue 20 (February 2009) is shown in brackets 2. Combines with each set of technology factors to produce the individual technology indices 3. This indicates US states with renewable portfolio standards (RPS) and favorable renewable energy regimes The US leads the All renewables index at May 2009, These two European announcements have influenced the where The American Recovery and Reinvestment Act (ARRA) infrastructure score of the affected EU Member States in the has started to influence sectors of the market. In an example all renewables index, for further details see page 11. of this Western Area Power Administration has reported 100 Also in this issue, the solar index has been enhanced through proposed transmission projects in response to its request for the creation of dedicated solar PV and CSP indices. This has interest in RE grid projects, which is supported by US$3.25 impacted all countries in the All renewables index (see page 21 billion borrowing authority as part of the ARRA. for further details). This issue has also seen the proposal of the European China retains sole occupancy of third place in the all renewables Economic Recovery Plan (EERP) (see page 11) set before index, following consistent governmental support despite the the European Council. The planned spend includes backing economic downturn and retaining long-term growth expectations. for specific grid, carbon capture and offshore wind projects. In India, the federal government has announced a revised target Also announced in the period was the European Commission’s of 10% renewable energy by 2012 from the current installed intention to allocate a significant amount of the Cohesion base of under 8%. This has enhanced India’s overall score by one Policy monies to support the building of a green economy in index point. Member States. 10 Renewable energy country attractiveness indices Issue 21
  • 11. Long-term wind index at May 2009 Rank1 Country Wind index Onshore wind Offshore wind 1 (1) US2 71 75 58 2 (1) China 67 71 55 2 (3) Germany 67 66 71 4 (4) UK 63 61 67 4 (5) India 63 70 42 6 (5) Spain 62 67 46 7 (7) Canada 59 63 45 7 (8) Italy 59 64 46 7 (11) France 59 60 54 10 (8) Ireland 57 58 57 11 (11) Portugal 56 61 43 12 (8) Greece 53 57 42 13 (13) Sweden 52 52 51 14 (13) Australia 51 54 43 15 (15) Belgium 50 48 55 16 (17) Netherlands 49 50 49 16 (15) Poland 49 53 39 18 (18) Denmark 48 45 54 18 (19) Norway 48 49 45 20 (20) New Zealand 46 50 36 21 (21) Japan 44 46 38 21 (21) Brazil 44 48 34 23 (23) Turkey 43 46 36 24 (24) Finland 33 32 35 25 (25) Austria 31 41 NA Source: Ernst & Young 1. Ranking in issue 20 (February 2009) Long-term wind index is shown in brackets 2. This indicates US states with RPS and favorable renewable energy regimes Canada has fallen one point in the all renewables index due to The combined impact of the proposed EERP, and the recent the failure of the Canadian federal budget to deliver support to announcement regarding allocation of Cohesion Policy funds existing renewable technologies by not extending the existing to the green economy, have led to a raft of single point rises in ecoENERGY program. As a result, reserves for the tariff will likely European countries in the Long-term wind index. all be allocated within the current year. Also in the Long-term wind index, China has risen one The proposed EERP promises subsidies to specific grid link point due to continued support for green energy from the projects with a combined value of €910 million as well as primarily government-owned utilities providing stability to subsidies for specific offshore wind projects totaling €565 million the electricity market. of support. India’s score has strengthened one point on the back of increased On 9 March 2009, the European Commissioner for Regional wind tariffs in Gujarat and a confirmation by the government on a Policy announced that €105 billion of the budget set aside for the new renewable energy target of 10% of capacity by 2012. Cohesion Policy between 2007 and 2013 would be invested in the The Swedish government has indicated that simplification of the green economy. Of this, €4.8 billion has been allocated for the authorization procedures for wind farms is being considered. renewable energy sector within Member States. The motioned abolition of existing ‘double regulation’ has helped boost the Swedish score by one point. Renewable energy country attractiveness indices Issue 21 11
  • 12. Country focus – US Tax credit or grant Lauren Engineers & Constructors recently signed a contract with Florida Power & Light as the engineering, procurement Ranking Issue 21 Issue 20 and construction contractor for a new 75MW CSP plant located All renewables index 1 1 near Indiantown, Florida. The project will use parabolic trough Long-term wind index 1 1 technology and connect to an existing combined-cycle gas power plant. Near-term wind index 1 1 Florida Power & Light has also announced they will build a 75MW Source: Ernst & Young solar PV plant at Babcock Ranch, Florida. Subject to Florida State The onshore wind sector in the US continues to perform well, approvals, construction of the Florida Power & Light solar facility reflected by an announcement by the American Wind Energy is expected for Q4 2009. Association stating that capacity totaling 2,836MW was installed Pacific Gas and Electric Company (PG&E) plans a five-year in Q1 2009. Nine states now have over 1GW of onshore wind program to develop up to 500MW of solar PV power in its capacity installed. northern and central California service area. The proposed This impressive rate of construction, however, is not program consists of up to 250MW of utility-owned PV generation expected to continue. Those projects coming online now were and an additional 250MW to be built and owned by independent driven by a rush seen in the industry to close deals before the developers under a ‘streamlined regulatory process.’ PG&E hopes production tax credit system was due to expire at the end of for approval from the California Public Utilities Commission later 2008. This, combined with the recent economic turmoil, will slow this year. Expected to be up and running by 2015, the solar PV the rate of projects coming online during 2009 and into 2010. projects are expected to deliver more than 1,000GWh of solar power annually. In all, the program could meet over 1.3% of The offshore wind and marine sectors took a step forward when PG&E’s electricity demand. the Department of the Interior issued a framework for the leasing of the Outer Continental Shelf (OCS) for offshore wind, tidal and All these stories and more are explored in detail in the US states wave projects. The process, as discussed when announced in Attractiveness Indices. the Q4 2007 issue of the Country Attractiveness Indices, will be overseen by the Minerals Management Service (MMS) and Contact: includes regulation on rules for leasing, easements, rights of way, Michael Bernier and methods of revenue sharing with coastal states. The revenue Tel: +1 617 585 0322 sharing rules provide that 27.5% of the royalties will go to the Email: coastal state. Fred Copeman NRG Energy, Inc. has signed an agreement with eSolar to develop Tel: +1 617 375 2484 500MW of solar CSP plants in California and the southwest US. Email: NRG will invest approximately US$10 million for equity and associated development rights for three projects. US state all renewables index top 5 All renewables Long-term wind Long-term solar Biomass Geothermal Infrastructure Ranking1 State index index index2 index index index3 1 (1) Texas 72 80 67 61 63 76 2 (2) California 66 66 80 79 75 81 2 (2) New York 66 72 60 64 60 59 4 (4) New Mexico 62 67 68 53 65 76 4 (6) Massachusetts 62 65 63 68 67 75 Source: Ernst & Young US Attractiveness Indices 1. Ranking in Q4 2008 long-term wind index in brackets 2. Solar index represents the index score for both large- and small-scale solar 12 Renewable energy country attractiveness indices Issue 21
  • 13. Country focus – Germany Feed-in tariff through non-recourse debt from a consortium of banks. First Solar and juwi intend to sell the majority of the project Ranking Issue 21 Issue 20 after its completion. Construction of the project began in January All renewables index 2 2 2009, and the first 15MW have been completed. The remaining Long-term wind index 21 21 38MW are scheduled to be completed by the end of 2009. Near-term wind index 5 41 Ersol, part of the Bosch Group, has begun the expansion of its solar production, setting up a new manufacturing facility for Source: Ernst & Young 1. Joint crystalline solar cells and modules in Arnstadt. €530 million will be invested in the new production unit between now and 2012. Project news dominates activity in Germany this issue; The biomass sector saw Epuron, a subsidiary of Conergy, sell two for instance, DIF Renewable Energy (DIF), part of private of its biogas projects with a total output of 1.25MW to renewables equity player Dutch Infrastructure Fund, has acquired 26.7MW investor CEE Bioenergie Holding. The financial holding company of German wind assets from e.n.o. energy. DIF has also is developing its own portfolio of biogas projects by acquiring completed the acquisition of a 16MW German wind project existing biogas plants and installing new medium-sized plants from Renerco Renewable Energy Concepts. The agreement with (500kW to 2MW). The two companies are planning to develop e.n.o. energy comprises the purchase and financing of five wind their partnership in the future. farms in the states of Brandenburg, Saxony and Saxony-Anhalt, while the agreement with Renerco Renewable Energy Concepts Contact: is the acquisition of one wind farm in northeast Germany. Andreas Luecke Also in the wind sector, Germany’s Allianz Specialised has Tel: +49 40 36132 12560 acquired a 24MW wind farm in Brandenburg, from Denker & Wulf, Email: as part of Allianz’s alternative asset investment activities. Robert Seiter In the solar sector, First Solar and juwi Holding AG have secured Tel: +49 30 25471 21415 financing for a 53MW PV power plant near the German city of Email: Cottbus. More than 80% of the required project capital is financed Renewable energy country attractiveness indices Issue 21 13
  • 14. Country focus – China Tender In onshore wind, Dutch renewables company Econcern has signed agreements to invest a total of €863 million in onshore Ranking Issue 21 Issue 20 wind farms in China. The agreements represent over 720MW All renewables index 3 3 of capacity. Econcern has signed term sheets for three onshore Long-term wind index 2 1 21 wind farm projects with CNOOC New Energy, a full subsidiary of China National Offshore Oil Corporation, and for one onshore Near-term wind index 2 2 wind farm project with Sinohydro Renewable Energy, a full Source: Ernst & Young subsidiary of Sinohydro Corporation. The two deals combined will 1. Joint make Econcern a major player in the Chinese sustainable energy market. Construction of the projects is expected to start in 2009. On 1 May 2009 the Chinese National Energy Administration reported an increase in its 2020 wind power target from 30GW Developments in the offshore wind sector saw renewable energy to 100GW. This tripling of the wind power capacity goal consultancy SgurrEnergy appointed by the EU-China Energy and formalises the rate of growth the industry already displays and Environment Programme to advise on the potential for China to ties in with existing capacity forecasts. Hence the raised target exploit its offshore wind resource. Glasgow-based SgurrEnergy, has already been factored into our country attractiveness indicies which set up a base in Beijing in 2006, will work in partnership scores. 12GW were installed by the end of 2008 (Source: Global with the China Meteorological Administration (CMA) to assess Wind Energy Council) and we are predicting 46GW over the next whether it is economically viable to construct offshore wind farms five years. That would total 58GW by the end of 2013, which along a 10,000km stretch of coastline from Fujian to Shandong. is already well in excess of the original goal of 30GW by 2020. Extrapolating at 10GW per year, capacity would exceed 100GW Contact: by 2020. In addition to extensive wind resource in its north and Alex Ng northwest regions, China is also now developing wind farms off Tel: +86 10 5815 2865 its eastern and southern coasts, driving up installed capacity. Email: The Chinese renewables market, especially within the wind sector, appears to be weathering the credit crunch relatively well due to the influence of the state on the major energy utilities. Country focus – Spain Feed-in tariff The solar CSP sector is driving the project news this issue, with Acciona starting construction work on a 50MW CSP plant in Ranking Issue 21 Issue 20 Majadas de Tiétar, southwest Spain. The plant will enter service in All renewables index 41 5 the second half of 2010 and, by the end of 2010, Acciona plans Long-term wind index 6 6 to have five CSP plants in operation, four in Spain and one in the US, accounting for an overall investment of around €1.25 billion. Near-term wind index 4 41 This particular project requires an investment of €237 million. Source: Ernst & Young 1. Joint Also in the CSP market, Grupo Ibereolica and Inveravante have signed an agreement to start the joint construction of two 50MW The Spanish central government has authorised 88.7MW of new CSP plants in Andalucia and Extremadura. With a €600 million solar PV projects in its first call to tender since the legislation investment, these are the first two solar projects of a total of eight was passed in September 2008. The legislation (Royal Decree which the company plans to build and operate in Spain. 1578/2008 discussed in Q3 2008) was designed to slow down In offshore wind, Spain is expected to open a tendering process the rapid growth of the solar PV sector in Spain to a financially for 3GW of offshore wind sites. This is the start of a process which manageable level. The new rules set an annual quota of 500MW could see wind farms coming online by 2013. of installed PV capacity, split between the four quarters. Reduction in solar PV tariffs and a market cap has prompted a rise Contact: in interest in CSP. The target for 2010 is for 500MW of installed Pablo Tramoyeres Galvan solar thermal capacity. Spain currently has approximately 225MW Tel: +34 91 5727 380 of installed CSP capacity and market expectation is that a further Email: 500MW will be added in the next year, allowing Spain to push past Juan María Román Gonçalves its 2010 target. Lobbying to extend the target and the tariff cap is Tel: +34 94 4243 777 currently underway. Email: 14 Renewable energy country attractiveness indices Issue 21
  • 15. Country focus – India Feed-in tariff Gujarat has also signed firm proposals for setting up solar power projects with companies like Euro Ceramics (100MW), Ranking Issue 21 Issue 20 Reliance, Surya Chakra, Tata Power (200MW), Essar (50MW) All renewables index 4 1 4 and Indiabulls (150MW). Long-term wind index 4 1 4 Kolhapur-based Ghodawat plans to invest US$402.3 million in Near-term wind index 3 3 the next three to four years in its wind energy business for setting up wind farms and wind turbine manufacturing facilities. Source: Ernst & Young 1. Joint It currently has 55MW wind farms in Maharashtra, Gujarat, Karnataka and Rajasthan. The Central Electricity Regulatory Commission (CERC) is soon to Bharat Heavy Electricals Ltd. (BHEL) has signed a JV with announce a tariff regulation for renewable power. Currently 15 Kerala Electrical & Allied Engineering Co Ltd. (KEL) for setting out of 28 states have set quotas for renewable energy purchase. up a manufacturing facility for wind power generators. The Those states which do not have sources of renewable energy proposed JV expects to generate a turnover of US$12.3 million would have to buy renewable energy certificates from the states by next year. which have surplus power. CERC proposes to bring out a detailed discussion paper to finalize the setting-up of a renewable power Himachal Pradesh has granted approval to 3 small hydro exchange where such certificates would be traded. projects at Siyul (13MW), Kilhi Bahal (7.5MW) and Shalvi (7MW) amongst a total of 13 hydro projects with capacity of 1,583.5MW. Many of the state governments have recently announced an It also approved 27 projects with a capacity of 81.90MW of self- increase in their wind power tariffs. Gujarat has announced an identified hydro projects under the state sector. increase from US$68/MWh to US$70/MWh, Madhya Pradesh from US$80/MWh to US$81/MWh and Tamil Nadu from US$58/ A 2MW biomass co-generation plant, at a project cost of US$3.1 MWh to US$68/MWh. million, using plywood waste was commissioned at Bharat Starch Industries at Yamunanagar in Haryana. Haryana Renewable Gujarat has announced its Solar Power Policy 2009, Energy Development Agency (HAREDA) is implementing around which provides for a maximum solar power generator (SPG) 20 such projects totaling 190MW. capacity in the state of 500MW; minimum capacity of each SPG should be 5MW. Rajasthan is expected to add 100MW biomass-based capacity as per the MoUs signed with various private players such as New solar tariffs in Gujarat Sambhav Energy, SM Environmental Technologies, Sathyam Power Ltd., etc. Solar PV (US$/MWh) Solar CSP (US$/MWh) ETA Ascon Star Group, via subsidiary ETA Powergen Pvt. Ltd., First Years First Years is developing a 10MW biomass project in Virudhunagar district, 12 years 13-25 12 years 13-25 Tamil Nadu. The proposed INR 463 million (US$9 million) plant Projects will use wood-based biomass feedstock including juliflora, cotton commissioned 254 59 195 59 before 31/12/2010 stalk and maize stalk. The firm has submitted its EIA report to Projects Tamil Nadu Pollution Control Board and said that it plans to set up commissioned 234 59 176 59 similar biomass projects in other Indian states. before 31/03/2014 Source: Ernst & Young Contact: Himachal Pradesh has also announced tariffs of 204 US$/MWh Sudipta Das and 177 US$/MWh for solar PV and solar thermal respectively for Tel: +91 33 6615 3400 projects commissioned before December 2009 within the bracket Email: of 1-5MW. Renewable energy country attractiveness indices Issue 21 15
  • 16. Country focus – Italy Green certificate and feed-in tariff installations across the Mediterranean region. The Montalto di Castro plant is being managed through a company called Ranking Issue 21 Issue 20 Cassiopea PV srl, a subsidiary of SunRay Renewable Energy. All renewables index 7 6 Trina Solar Limited has announced the completion of a 4.7MW Long-term wind index 4 1 41 PV facility developed by ErgyCapital, an investment company Near-term wind index 6 71 specializing in the fields of renewable energies and energy-saving products. The project, located in the town of Serravalle Scrivia in Source: Ernst & Young 1. Joint the Piedmont region of Italy, is currently Italy’s largest PV facility and single roof-mounted solar system, involving approximately AXA Private Equity, the European diversified private equity house, 38,000 square meters of solar panels. and the industrial company, Tozzi Group, have established a joint venture to invest in the Italian renewable energy sector. The JV, Contact: TRE & Partners S.p.a., acts as a holding company and comprises Robert Giacomelli investments in wind farms, hydroelectric and solar projects in Tel: +39 02 80 66 92 68 Italy. Assets will come from the Tozzi Group’s portfolio. Tozzi Email: Group will have a 55% holding in the JV with the remainder being held by AXA Private Equity. Angelo Era Tel: +39 06 6753 54 69 Construction work has started on the largest PV plant in Email: Italy (24MW). The project is being constructed by SunRay Renewable Energy, which is developing solar power 16 Renewable energy country attractiveness indices Issue 21
  • 17. Country focus – UK Green certificate and feed-in tariff Airtricity and Aquamarine Power have formed a JV with the aim of developing 1GW of marine power around the UK and Ireland. Ranking Issue 21 Issue 20 Several potential sites have been identified and any projects will All renewables index 7 6 be based on Aquamarine Power’s wave and tidal energy solutions. Long-term wind index 41 41 In April, Greater Manchester Waste Disposal Authority’s Near-term wind index 6 71 PFI procurement reached financial close, supported by Ernst & Young. This is the largest waste PFI project in Europe, Source: Ernst & Young 1. Joint requiring capital expenditure of GB£640 million and a gross contract value over the 25-year term of GB£4.4 billion. Solid This issue has seen the release of the UK Budget 2009. recovered fuel will be treated in a 375,000-tonne CHP-enabled The budget set a global precedent by introducing the first waste-to-energy plant which will provide both heat and power carbon budgets. These commit the UK to the first three years direct to Ineos Chlor Vinyls’ Runcorn plant. Other facilities include towards a target reduction in carbon emissions by 34% of 1990 five anaerobic digestion plants that will be capable of treating levels by 2020. over 250,000 tonnes of green and food waste. The budget also announced proposed changes in the offshore Viridor Waste Management Limited, John Laing plc and Ineos wind Renewables Obligation banding, increasing the ROCs earned Chlor are shareholders in the project. The construction sub- from offshore wind generation from 1.5 to 2 for the financial contractors include Keppel Seghers for the waste-to-energy plant year 2010-11 and 1.75 for the year 2011-12. This is expected to and Clarke Haase and Enpure who will deliver the AD plants. provide GB£525 million support from 2011 to 2014. A new GB£500,000 (US$744,000) fund has been launched to Following the closure of Round 3 of the Crown Estate UK offshore help environmental entrepreneurs and small businesses develop wind auctions, the Crown Estate has confirmed it received their ideas to generate electricity from the river Severn’s tidal multiple bids for each of the nine zones. 40 different bids were power. The scheme is being managed by the Department of received from 18 different companies and consortia for the sites. Energy and Climate Change, the Welsh Assembly Government, The Crown Estate has issued a positive opinion regarding the Defra, and the South West of England Regional Development healthy interest in the sites and the quality of the bids submitted. Agency. The Severn Embryonic Technologies Scheme is designed to further develop proposals like tidal reefs and fences and other Changes to the system of allocating grid to offshore potential ideas. projects continues. It is likely that the revised process of allocating licenses for the grid connections will remove the pressure on developers’ capital by facilitating construction of Contact: the connections by offshore transmission license holders. Ben Warren Tel: +44 2 0795 16024 In the near term, a program of reshuffling the onshore grid Email: connection queue is to provide revised connection offers to projects which are developing in favor of projects which have slower progress. The second tranche of revised offers is expected soon by developers in Scotland and is expected to be about 457MW of revised offers. Further grid developments have seen J&S Marine being awarded a contract from the European Marine Energy Centre to provide and install connectivity solutions for wave and tidal projects off Orkney. The connections will allow wave and tidal projects to connect to the wave and tidal hubs and then on to the national grid. Renewable energy country attractiveness indices Issue 21 17
  • 18. Country focus – Poland Green certificate According to the assumptions used as a basis for Poland’s Energy Policy until 2030, published by the Ministry of Economy in March Ranking Issue 21 Issue 20 2009, development of renewable energy generation is a strategic All renewables index 15 1 161 priority for the Polish energy sector. The document assumes that Long-term wind index 161 171 in 2030 at least 20% of the total energy production in Poland will be generated by renewable energy sources. Near-term wind index 14 14 RWE Renewables Polska (RWE) has entered into two conditional Source: Ernst & Young 1. Joint sale and purchase agreements (SPA) with PEP S.A. for a 30% stake in wind farm sites in Tychowo and Suwałki. Under the terms March 2009 saw a focus in Poland on application of the SPA, RWE has paid PLN4 million (US$1.1 million) for the submissions by renewable energy projects for EU funds. option to purchase the project and will pay a further PLN8.1 The funds under Priority IX.9.4. amounting to €700 million million (US$2.3 million) upon operational commencement of the (EU Structural Funds) are being distributed by Instytut Paliw i wind farm sites. The two wind farms are to reach 83MW capacity Energii Odnawialnej. The deadline for application was in total. 14 April 2009. Also in the wind sector, DONG Energy has acquired the Karcino There were 120 applications for funds (see table below) wind farm project. It is the second wind farm project in Poland. amounting to PLN3.15 billion (c.US$890 million) and we For the acquisition of Karcino (fully permitted project), DONG has await news of successful applicants. paid €5.1 million (US$6.65 million). The project is expected to have an installed capacity of 51MW once constructed. Applications for EU funds by technology Type of project No. of submitted Contact: application for EU funds applications Kamil Baj Wind energy 86 Tel: +48 22 557 8855 Biogas 19 Email: Hydro 6 Biomass 5 Jacek Rodzeń Geothermal 2 Tel: +48 22 557 6234 Solar 2 Email: Source: IPiEO Project activity in Poland during this issue has been centered around wind farm development. Poland experienced a high increase in wind generation capacity from 451MW at the end of 2008 to 547MW as at 28 February 2009. Issues relating to obtaining grid access are taking on more importance and an amendment to the Energy Act concerning the issue is being discussed. The new draft law which plans to regulate the process of issuing grid connection, however, has met significant criticism. 18 Renewable energy country attractiveness indices Issue 21
  • 19. Near-term wind index at May 2009 Rank1 Country Wind index 1 (1) US2 81 2 (2) China 78 “With the exception of 3 (3) India 55 China, MW forecasts 4 (4) Spain 51 5 (4) Germany 50 show a general reduction 6 (7) UK 48 in installations in 2009, 7 (7) France 47 with a gradual return to 7 (9) Italy 47 long-term installation 9 (6) Canada 46 growth rates over a 10 (10) Portugal 41 11 (12) Australia 40 longer time horizon” 11 (11) Ireland 40 11 (12) Greece 40 14 (14) Poland 37 15 (15) Belgium 36 15 (15) Brazil 36 While the US has a clear lead in the Near-term index, it has yet to 17 (17) Sweden 35 return to the high of 88 points seen in Q4 2007. 18 (19) Netherlands 34 Despite expectations of greater MW installations during the near 19 (21) Turkey 33 term than the US, China ranks second in the Near-term index 19 (18) Norway 33 and has maintained ITS score this issue. This is due to market 19 (21) Denmark 33 accessibility concerns which, although they have been reducing, 22 (19) New Zealand 32 are still present. 23 (23) Japan 27 Spain moves ahead of Germany in the Near-term index as 24 (24) Austria 24 although the majority of projects within Germany’s offshore 25 (24) Finland 23 program are currently progressing as planned, slightly increased Source: Ernst & Young risks in the offshore sector driven by the continued economic 1 .Ranking in issue 20 (February 2009) Near-term wind index is shown in brackets downturn have reduced Germany’s score. However, Spain’s 2. This indicates US states with RPS and favorable renewable energy regimes. onshore installations are expected to remain at 2006 and 2008 levels during the recession. The Near-term wind index takes the perspective of an investor looking to make a commitment within the next two years. The The UK has risen a point to reflect the increased short-term methodology and weightings used to produce the Near-term wind impact of the recent announcement of higher ROC bandings for index are different to those of the Long-term index so the two offshore wind until 2010-11, announced in the recent budget. For are not directly comparable. The Near-term wind index places details of the new ROC allowance for offshore wind see page 17. a greater emphasis on market growth and takes into account a This point increase has moved the UK above France and Italy. narrower range of parameters than the Long-term wind index. Italy fell one point and a position, following expectations that In the US, the impact of the ARRA has started to be felt, as a investments from the EU will not support an expected decline in number of projects have started to move forward, for example annual MW installation rates over the near term. First Wind’s 204MW Milford Wind Corridor (phase I) project in Canada has halted its fall seen in issue 20, as forecasts have been Milford, Utah. Our forecasts for 2009 have reduced from Issue realigned with long-term installation expectations. 20, as we expect installations driven from the ARRA stimulation to be realized in 2010, rather than 2009. The overall reforecast has driven a gain of two points in the US, while availability of debt finance remains an issue for some projects and holds back the US’ score. Renewable energy country attractiveness indices Issue 21 19
  • 20. Offshore wind, marine and tidal focus Offshore wind index – top 10 Norway has drafted a new law allowing the government to control offshore developments within its waters. This would cover both Offshore wind offshore wind and wave developments. The law is to be put before Rank1 Country index the Norwegian parliament before the summer and is likely to be 1 (1) Germany 71 similar to the current legislation covering waterways and oil and 2 (2) UK 67 gas reserves. 3 (3) US2 58 RWE Innogy has acquired rights to the North Sea Windpower 4 (4) Ireland 57 project 3 via its acquisition of Energieanlagen. The development 5 (4) China 55 will be Germany’s largest offshore wind farm at 960MW. 5 (6) Belgium 55 Statkraft has agreed to purchase a 50% stake from StatoilHydro 7 (7) Denmark 54 in the 315MW Sheringham Shoal offshore wind farm off the 7 (8) France 54 Norfolk coast. 9 (9) Sweden 51 10 (10) Netherlands 49 Irish Sea Source: Ernst & Young ABB has been awarded a contract to install a 500MW 1. Ranking in issue 20 (February 2009) is shown in brackets bi-directional transmission line between Ireland and Wales 2. This indicates US states with RPS and favorable renewable energy regimes by EirGrid. The connection is hoped to help the market for As discussed on page 17, the UK government has announced a renewables by providing a larger market to utilize power at tariff enhancement for offshore wind projects over the next two times of peak generation. years. Due to the timeframe of the support, the UK’s off-shore score has not risen in the long-term offshore wind index. Black Sea In the US, however, the Department of Interior issued a A pilot 5kW demonstration wave energy project was opened in framework for the leasing of the OCS for offshore wind, tidal and Turkey during this issue period. Importantly, during the opening wave projects (see page 12 ). ceremony the Turkish Energy Minister suggested the government may offer support for wave energy projects. Depending on the level of support, Turkey may well feature in the wave and tidal Wave and tidal index – top 10 index top 10 in the future. Offshore wind Rank Country index Pacific Ocean 1 Portugal 68 Atlantis Resources has signed an agreement to install a 1MW tidal 2 Ireland 64 energy plant in Western Australia. 2 UK 64 Also in Australian waters, wave energy developer Carnegie 4 US 1 60 Corporation has signed heads of agreement with Investec Bank 5 Australia 53 outlining their mutual intention to work together. Investec intends 6 France 52 to provide up to AU$250 million (US$166 million) provided 7 Canada 47 project milestones and conditions are met. 8 New Zealand 44 9 Norway 43 Contact: 9 Spain 43 Andrew Perkins Source: Ernst & Young Tel: +44 1 179 812 325 1. This indicates US states with RPS and favorable renewable energy regimes Email: Arnaud Bouille North Sea Tel: +44 1 392 284 392 Wave energy developer Aquamarine Power announced Email: successful test results from its Oyster wave energy converter, exporting electricity to the national grid at the New and Renewable Energy Centre near Newcastle in the UK. The test confirmed the full-scale device will have a capacity of just over 350kW. 20 Renewable energy country attractiveness indices Issue 21
  • 21. Feature – solar indices at May 2009 Solar Solar Concentrated Rank1 Country index photovoltaic solar power 1 US1 73 72 75 2 Spain 67 65 71 3 Germany 65 74 28 4 Italy 64 66 60 5 India 61 61 58 6 Greece 56 60 43 7 Australia 55 57 46 8 France 53 61 23 9 Portugal 51 58 22 10 China 46 48 36 “Supporting the road to grid parity, 11 Japan 43 48 23 tariff degression policies in, for 11 Austria 43 53 N/A example, Germany and Spain are seen 13 Brazil 40 44 28 as a way to force efficiencies into the 13 Turkey 40 43 28 supply chain and lower project costs.” 15 UK 38 47 N/A 16 Netherlands 37 47 N/A 17 Sweden 35 43 N/A We expect the CSP market to grow significantly over the medium term, due to a number of factors. One key driver is 18 Poland 34 42 N/A the ability to combine CSP plants with other power generation 19 Canada 32 40 N/A technologies, specifically CCGT plants and create integrated solar 19 Denmark 32 40 N/A combined cycle plants, or biomass facilities. Additionally, CSP plants can employ heat storage facilities, through molten salts 21 Ireland 28 35 N/A or ceramic heat trapping technologies and stretch generation 21 Belgium 28 34 N/A time beyond daylight hours. The combination and creation of 23 New Zealand 25 31 N/A hybrid generation facilities allows the development of renewable energy generation assets onto existing infrastructure, therefore 24 Norway 24 30 N/A improving project economics, and the ability to provide base 25 Finland 20 25 N/A load power. Source: Ernst & Young The PV market is expected to grow by over 30GW by 2012 1. This indicates US states with RPS and favorable renewable energy regimes and is reaching a mature stage, with many market players spanning large parts of the value chain. However, the solar PV The long-term solar indices value chain is facing a period of oversupply, compounded by The solar index has been enhanced this issue with the inclusion falling silicon prices; we expect consolidation to occur as smaller of a CSP index. CSP is sometimes referred to as solar thermal manufacturers struggle during the recession. electricity generation (STEG). However, a considerable CSP pipeline of around 7GW now exists The solar index now combines the attractiveness of a market at a global level, having developed from historically very modest for PV industry investment and CSP industry investment with a levels. The growth in the CSP sector is supported by a growth weighting of 80:20 respectively. in project size. Early CSP projects were installed with less than 50MW capacity, whereas recent and planned projects, employing The decision to enhance the solar index with individual PV parabolic trough technology, are starting at 50MW installed and CSP indices is driven through anticipated market growth capacity and above. in each market, the different market dynamics and market/ technology suitability. Many developers are stating that grid parity, being the point at which electricity from solar PV costs the same as conventional power, could be reached by 2012-14 in some markets. Supporting the road to grid parity, tariff degression policies in, for example, Germany and Spain are seen as a way to force efficiencies into the supply chain and lower project costs. Renewable energy country attractiveness indices Issue 21 21
  • 22. Feature – solar indices at May 2009 (cont’d) Solar photovoltaic index – top 10 Concentrated solar power index – top 10 Rank Country Solar photovoltaic Concentrated solar Rank Country power 1 Germany 74 1 US1 75 2 US1 72 2 Spain 71 3 Italy 66 3 Italy 60 4 Spain 65 4 India 58 5 India 61 5 Australia 46 5 France 61 6 Greece 43 7 Greece 60 7 China 36 8 Portugal 58 8 Brazil 28 9 Australia 57 8 Germany 28 10 Austria 53 8 Turkey 28 Source: Ernst & Young 1. This indicates US states with RPS and favorable renewable energy regimes Source: Ernst & Young 1. This indicates US states with RPS and favorable renewable energy regimes The solar PV index at May 2009 is led by Germany, whose position is based on a stable tariff regime, albeit with reducing CSP technology requires solar resources over a certain level, tariffs going forward, and an established domestic supply chain. which are found approximately between the 40th parallels North With the price of silicon falling in line with the general and South. As such, countries outside this bracket are not scoring commodity price trend, expectations are that Germany’s on the CSP index. installation rate will continue. The US leads the CSP index at May 2009. The US’ score is driven The US, in second place in the solar PV index, lies just behind by world-class resource in south western states and favorable Germany. The US has significant resource as well as a desire to support from Department of Treasury grants. use renewables as a tool to overcome the recession, as seen in Just behind the US, Spain has seen significant CSP market growth President Obama’s stimulation measures announced last issue. in recent years and has a considerable proportion of near-term The impact of these measures may already be seen, following global forecast growth. A strong solar thermal tariff and suitable several manufacturing scale-up and new PV projects announced resources drive Spain into second place. However, issues exist this quarter. with the tariff which hold Spain back in the CSP index. Third in the solar index, Italy has abundant resource and a The US and Spain are expected to be the two key solar CSP strong feed-in tariff, but a market cap of 1,200MW. growth markets; as a consequence, there is a significant gap Administrative processes continue to restrain Italy’s solar between the US and Spain, and the following countries. PV attractiveness; however, there is hope that these can be resolved and streamlined. 11 index points behind Spain, Italy ranks third in the CSP index at May 2009. CSP projects are being constructed and potential Behind Italy lies Spain in fourth place. The Spanish PV exists to develop more, as the government has provided a feed-in market boomed and installed over 1GW in 2008. However, tariff allowing €220/MWh-€280/MWh based on the solar fraction. regulatory changes reduced the tariff and capped the market Italy has sufficient solar resources, especially in the south, to at 500MW for 2009. This action reduced Spain’s attractiveness sustain economic CSP generation and is expected to move up the relative to its previous position under old legislation. solar CSP index over the forthcoming years. However, Spain still remains an attractive market, as a proven market for PV installations which is well understood Just behind Italy, India ranks fourth in the CSP index at May by the finance community and developers alike and a 20% to 2009. India currently has no CSP projects; however, CSP forms 40% reduction in module prices. a major part of India’s National Action Plan on Climate Change, launched in June 2008. A number of states have preferential Traditionally strong in the solar PV manufacturing sector, offtake tariffs which, when combined with a strong resource, Japan does not feature in the solar PV index top 10. This is a has stimulated interest and generated a considerable pipeline. consequence of Japan’s recent support package focusing on See page 15 for further details on India’s CSP activity. domestic and public buildings and not large-scale solar PV farm development. 22 Renewable energy country attractiveness indices Issue 21
  • 23. Commentary — guidance notes Long-term index Other renewable energy resources include small hydro, landfill As stated on page 2, the individual technology indices, gas and wave and tidal technologies. Energy from waste is not which combine to generate the all renewables index, are made considered. Each of the indices consider, on a weighted basis, up as follows: the following: • Renewables infrastructure index – 35% 1. Power offtake attractiveness – 19%: this includes the price received, the potential price variation and length of PPAs • Technology factors – 65% granted. Higher scores are also achievable if a government These guidance notes provide further details on the renewables guarantees the power offtake rather than merchant offtakers. infrastructure index and the technology factors. 2. Tax climate – 11%: favorable, high-scoring tax climates that stimulate renewable energy generation can exist in a variety Renewables infrastructure index of forms and/or structures. The most successful incentives The renewables infrastructure index is an assessment by country and structures have been direct RE tax breaks or brown of the general regulatory infrastructure for renewable energy. energy penalties, accelerated tax depreciation on RE assets On a weighted basis, the index considers: and tax-efficient equity investment vehicles for individuals. • Electricity market regulatory risk – 29%: markets that are fully 3. Grant/soft loan availability – 9%: grants can be available deregulated score higher, as they have experienced the ‘market at local, regional, national and international levels, and shock’ on underlying wholesale prices that this transition may depend on the maturity of a technology as well as may exert. While this may not affect current projects, these the geographical location of the generating capacity. Soft effects are particularly important when considering long-term loans have historically been used in pioneering countries of investment prospects. RE technologies to kick-start the industry. High scores are achieved through an array of grants and soft loans. • Planning and grid connection issues – 42%: favorable planning environments (low failure rates and strong adherence to 4. Market growth potential – 18.5%: this considers current national targets) score highly. Grid connection scoring is based capacity compared to published targets. Higher scores on the ease of obtaining a grid connection in a cost-effective are given if ambitious targets have been set and policy manner. The score also takes account of the degree of grid framework is in place to accelerate development. The realism saturation for intermittent technologies. of targets is taken into account as well as the seriousness with which they are being pursued (e.g., penalties in place for • Access to finance – 29%: a market with a mature renewable non-compliance). energy financing environment, characterized by cheap access to equity and good lending terms, will score higher. 5. Current installed base – 8%: high installed bases demonstrate that the country has an established infrastructure and This generic renewables infrastructure index is combined supply chain in place, which will facilitate continued growth with each set of technology factors to provide the individual and, in particular, encourage the repowering of older projects. technology indices. 6. Resource quality – 19%: for example, wind speeds and solar intensity. Technology factors 7. Project size – 15.5%: large projects provide economies These comprise six indices providing resource-specific of scale and a generally favorable planning environment, assessments for each country, namely: which facilitates project development financing. 1. Onshore wind index 2. Offshore wind index 3. Solar PV index 4. Solar CSP index 5. Geothermal index 6. Biomass and other resources index Renewable energy country attractiveness indices Issue 21 23
  • 24. Commentary — guidance notes (cont’d) Near-term wind index In the offshore near-term wind index, countries with no projects As stated on page 2, the near-term wind index focuses on estimated to reach construction in the next two years (early 2009 factors of most immediate concern to near-term investment in to end 2010) are excluded. wind energy. The scoring follows the same methodology as for It should be noted that the market growth potential score is the long-term wind index, but with a more focused set of based on a view taken of a range of business analysts’ forecasts parameters and a tailored weighting. Therefore, the indices and Ernst & Young’s own market knowledge. There is significant consider the following, on a weighted basis, for both onshore variation between analysts’ views on each market, and within and offshore wind separately: some markets, the variation is greater than in others. The • Power offtake attractiveness – 27% forecasts used are a market view only and the scores in no way guarantee that the forecasted capacity will be built. • Tax climate – 8% While comparisons have been made between scores in the • Resource quality – 14% long-term and near-term wind indices, it should be emphasized • Market growth potential (mid-2009 to mid-2011) – 40% that, due to the different weightings and parameters used, these cross-comparisons are of a narrative nature only and by • Project size – 11% no means indicate any quantitative valuation. 24 Renewable energy country attractiveness indices Issue 21
  • 25. Glossary Abbreviation Definition AD Anaerobic Digestion CAI Country attractiveness index CCGT Combined cycle gas turbine CHP Combined heat and power CSP Concentrated solar power EIA Environmental impact assessment EU European Union GDP Gross domestic product GW Giga watt GWh Giga watt hour IPO Initial public offering ITC Investment tax credit (US) JV Joint venture km Kilometer KW Kilowatt M&A Mergers and acquisitions MoU Memorandum of understanding MW Mega watt MWh Mega watt hour MWth Mega watt therm OEM Original equipment manufacturer P/E ratio Price-earnings ratio PFI Private finance initiative PPA Power purchase agreement PTC Production tax credit (US) PV Photovoltaic RE Renewable energy ROCs Renewables Obligations Certificates TWh Terra watt hour Renewable energy country attractiveness indices Issue 21 25
  • 26. Company index Company Page Company Page Company Page ABB 20 Denker & Wulf 13 IBC Solar AG 9 Acciona S.A 9, 14 Deutsche KWK GmbH 9 Iberdrola 7 Act Solar 8 DIF Renewable Energy 13 Iberdrola Renovables 7 AIG Financial Products Corp 8 DONG Energy 8, 17 Indiabulls 15 Airtricity 17 Dutch Infrastructure Fund 13 Ineos Chlor 17 Aktiv Wind 8 e.n.o. energy 13 Innovent GmbH 8 Alberta Wind Energy Corporation Econcern 14 Instytut Paliw i Energetyki 8 18 (AWEC) Odnawialnej EDP Renovaveis 7 Allianz Specialised Investments 13 Inveravante 14 EDP Renovaveis Brasil 8 Allied Engineering Co Ltd (KEL) 15 Investec Bank 20 Eirgrid 20 Amper Central Solar S.A 9 J&S Marine 17 EnBW 8 Aquamarine power 16, 20 John Laing PLC 17 Enel 8 Archimede Solar Energy 9 Juwi Holding AG 9, 13 Energieanlagen 20 Atlantis Resources 9, 20 Keppel Seghers 17 Epuron 13 Kerala Electrical & Allied AXA Private Equity 16 15 ErgyCapital 16 Engineering Company (KEL) Baugrund Sued Gesellschaft fuer 9 Lauren Engineers & Constructors 12 Geothermie mbH Ersol 13 Bharat Heavy Electrical Ltd (BHEL) 15 Mainstream Renewable Power 8 eSolar 12 Bharat Starch Industries 15 Max Weishaupt GmbH 9 Essar 15 Bord Gais Eireann 8 Mitsubishi Corporation 9 ETA Ascon Star Group 15 Borusan Holding 8 MMA Renewable Ventures LLC 9 ETA Powergen Pvt. Ltd 15 Bosch Group 12 Morgan Stanley 9 Euro Ceramics 15 BP 9 Municipal Mortgage & Equity LLC 9 EuroTrust 8 Bremer 9 National Semiconductor First Solar Inc 8, 9, 13 8 Corporation Carnegie Corporation 20 First Wind 19 Nippon Oil Corporation 8 Cassiopea PV srl 16 Fotowatio Renewable Ventures, Inc 9 NordLB 9 CEE Bioenergie Holding 13 FPL, Florida Power and Light 7, 12 OptiSolar Inc 8 China Guangdong Nuclear Power 8 Ghodawat 15 Park Wiatrowy Suwalki Sp zoo 8 Group China Guangdong Nuclear Wind Global Yatirim Holding AS 9 Park Wiatrowy Tychowo Sp zoo 8 8 Power Co Greater Manchester Waste PEP S.A 18 China Meteorological 17 14 Disposal Authority Administration (CMA) Pacific Gas and Electric Company Grupo Ibereolica 15 8, 12 China National Offshore Oil (PG&E) 14 Corporation Haryana Energy Development Polish Energy Partners SA 8 15 Agency CLP Holdings Limited 9 HgCapital Renewable Power Pro2 Anlagentechnik GmbH 9 8 CNOOC New Energy 14 Partners Fund Reliance 15 Conergy 13 Hydro Tasmania 8 26 Renewable energy country attractiveness indices Issue 21
  • 27. Company index (cont’d) Company Page Renerco Renewable Energy 13 Concepts Roaring 40s Renewable Energy 8 Pty Ltd RWE Innogy 9, 20 RWE Renewables Polska 8, 18 Sambhav Energy 15 Sathyam Power Ltd 15 SgurrEnergy 14 Shell 7 Siemens 9 Sinohydro Corporation 14 Sinohydro Renewable Energy 14 SM Environmental Technologies 15 Sorne Wind Limited 8 Space Energy Corporation 8 Statkraft 9, 20 StatoilHydro 20 SunRay Renewable Energy 16 Surya Chakra 15 Tata Power 15 Tozzi Group 16 TRE & Partners S.p.a 16 Trina Solar Limited 16 Viridor Waste Management Limited 17 Western Area Power 10 Administration Westphalia-Lippe Agricultural 9 Association White Owl Capital AG 9 Windfarm Elebras Cidreira 8 Xinjiang Goldwind 7 Yesil Enerji AS 9 Renewable energy country attractiveness indices Issue 21 27
  • 28. Ernst & Young Ernst & Young Renewable Energy Group Assurance | Tax | Transactions | Advisory With a dedicated 50-strong team of international advisors operating from our UK About Ernst & Young member firm, supported by a network of over 65 experienced professionals from our Ernst & Young is a global leader in member firms worldwide, Ernst & Young’s Renewable Energy Group helps clients to assurance, tax, transaction and advisory increase value from renewable energy activity. Members of the group provide advice services. Worldwide, our 135,000 people and services in the following areas: are united by our shared values and an unwavering commitment to quality. We • Financial advisory and valuation • Strategy review make a difference by helping our people, our clients and our wider communities • Financial modeling and structuring • Technologies achieve their potential. • Taxation • Onshore and offshore wind For more information, please visit • Finance raising • Biomass • Asset value optimization • Biofuels Ernst & Young refers to the global • Market entry strategy • Energy from waste organization of member firms of Ernst & Young Global Limited, each • Procurement strategy • Wave and tidal of which is a separate legal entity. • PPA tendering • Solar Ernst & Young Global Limited, a UK • Feedstock strategy • Fuel cells company limited by guarantee, does not provide services to clients. • Transaction support • CHP EYG no. DE0085 • PE advice • Landfill gas • IPO advice • Hydro © 2009 EYGM Limited. • JI/CDM financing • Carbon capture and storage All Rights Reserved. This publication contains information in summary • Strategic partnering form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference Contact should be made to the appropriate advisor. DPD11261.indd (UK) 05/09. Artwork by London DPD. For further information on our services and for future copies of the indices, please visit our website or contact: Ben Warren Andrew Perkins Partner Director Dane Wilkins Arnand Bouille Director Director Enquiries to the Guest Columnist Jonathan Johns should be addressed to Country attractiveness indices production supported by: Phil Dominy Mark Porter Senior Executive – Project Finance Executive – Project Finance Sam Reed Executive – Project Finance