Renewables - Country Attractiveness Index


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Presentation shared at Genera Event on May 12th 2009, sponsored by PROMOMADRID and IFEMA.
The objective was to share Spain's attractiveness in terms of renewables (especially solar) in comparison to other countries.

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  • Glossary Abbreviation Definition CHP Combined Heat and Power CDM Clean Development Mechanism MW Mega Watt (1,000kW) GW Giga Watt (1,000MW) IPO Initial Public Offering Long-term indices Refers to both all renewables index and long-term wind M&A Mergers and Acquisitions SDE Stimulate renewable energy - 'stimulering duurzame energie‘ IRR Internal Rate of Return PTC Production Tax Credit (US) MWh Mega Watt hour (1,000,000Wh) MWp Mega Watt peak KV Kilovolt PE Private Equity PPA Power Purchase Agreement mtoe Metric tonnes of oil equivalent PV Photovoltaic RPS Renewables Portfolio Standard JV Joint Venture ITC Investment Tax Credit (US)
  • The Ernst & Young country attractiveness indices provide scores for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies. The indices provide scores out of 100 and are updated on a regular basis. The latest was published in February 2009.
  • The country attractiveness indices provides a generic view. Different sponsor/financier requirements clearly affect how countries are rated and therefore their position in the ranking.
  • The long-term indices are forward looking, and take a long-term view. considers the individual technology indices, which combine to generate the all renewables index, are made up as follows: Renewables infrastructure index – 35% Technology factors – 65% The long-term indices comprises all renewables and long-term wind. The All renewables index provides an overall score for all renewable energy technologies. It combines individual technology indices as follows: Wind index — 75% Solar index — 10% Biomass and other resource index — 15% The Long-term wind index is derived from scoring: The onshore wind index – 74% The offshore wind index – 26% The near-term wind index takes a 2-year view based on the parameters of most concern to a typical investor. It focuses on factors of most immediate concern to near-term investment in wind energy. The index gives scores for onshore and offshore separately considering the following, on a weighted basis, for both onshore and offshore wind separately: Power offtake attractiveness – 27% Tax climate – 8% Resource quality – 14% Market growth potential (2009 to 2011) – 40% Project size – 11%
  • The renewables infrastructure index is an assessment by country of the general regulatory infrastructure for renewable energy. On a weighted basis, the index considers: Electricity market regulatory risk – 29%: markets that are fully deregulated score higher, as they have experienced the “market shock” on underlying wholesale prices that this transition may exert. While this may not affect current projects, these effects are particularly important when considering long-term investment prospects. Planning and grid connection issues – 42%: favorable planning environments (low failure rates and strong adherence to national targets) score highly. Grid connection scoring is based on the ease of obtaining a grid connection in a cost-effective manner. The score also takes account of the degree of grid saturation for intermittent technologies. Access to finance – 29%: a market with a mature renewable energy financing environment, characterized by cheap access to equity and good lending terms, will score higher. This generic renewables infrastructure index is combined with each set of technology factors to provide the individual technology indices.
  • Technology factors comprise 4 indices providing resource-specific assessments for each country, namely: 1. Onshore wind index 2. Offshore wind index 3. Solar index 4. Biomass and other resources index Each of the indices consider, on a weighted basis, the following: Power offtake attractiveness – 19%: this includes the price received, the potential price variation and length of Power Purchase Agreements granted. Higher scores are also achievable if a government guarantees the power offtake rather than merchant offtakers. Tax climate – 11%: favorable, high-scoring tax climates that stimulate renewable energy generation can exist in a variety of forms and/or structures. The most successful incentives have been: direct tax breaks brown energy penalties, accelerated tax depreciation on Renewable Energy assets and taxefficient equity investment vehicles for individuals. Grant/soft loan availability – 9%: grants can be available at local, regional, national and international levels, and may depend on the maturity of a technology as well as the geographical location of the generating capacity. Soft loans have historically been used in pioneering countries of RE technologies to kickstart the industry. High scores are achieved through an array of grants and soft loans. Market growth potential – 18.5%: this considers current capacity compared to published targets. Higher scores are given if ambitious targets have been set and policy framework is in place to accelerate development. The realism of targets is taken into account as well as the seriousness with which they are being pursued (e.g., penalties in place for non-compliance). Current installed base – 8%: high installed bases demonstrate that the country has an established infrastructure and supply chain in place, which will facilitate continued growth and, in particular, encourage the re-powering of older projects. Resource quality – 19%: for example, wind speeds and solar intensity. Project size – 15.5%: large projects provide economies of scale and a generally favorable planning environment, which facilitates project development financing.
  • US: Following President Obama’s signing of the Recovery and Reinvestment Act (sets out policy and funding aimed to double green energy generation by 2012) the US has risen by 3 points and moved into solo lead in the All renewables index. Germany: its score in the All renewables index has risen one point from Q3 2008, following the German Government’s reintroduction of accelerated depreciation. These new rules will only be applicable to assets acquired in 2009 and 2010. China, India and Spain: held their positions from Q3 2008 The UK: fell in the All renewables index during this issue as a result of market hesitation over the offshore wind sector. This has been compounded by wholesale power prices remaining relatively low and the current weakness of the sterling against the euro. Italy: has remained level in the All renewables index and Solar index; however, market uncertainty does remain over the government’s proposed adjustments to the feed-in tariff and proposed new retroactive communal tax on PV systems. France: has risen above Canada in the All renewables index after the release of a new government program in November, known as the “Borloo Plan”. Recovery and Reinvestment Act : The act includes important initiatives for the renewables sector including a three-year extension to the Production Tax Credits (PTC) system for wind, biomass, geothermal, hydropower and marine facilities, as well as the ability for generators to opt to claim an Investment Tax Credit (ITC) in lieu of the PTC. However, the most significant clause is a 30% treasury department grant, available on projects in construction by the end of 2010 and in service by the end of 2012 for wind projects and 2013 for other qualifying techologies. This gives support measures in the US a degree of certainty equivalent to a feed-in tariff, although the economics mean the hurdle rate for break-even returns has risen, particularly in the case of wind. Borloo Plan : Under the “Borloo Plan” France would be bound by law to reach a national overall target of a 23% share of energy from renewable sources in its final gross energy consumption by 2020 (compared with 10.3% in 2005).
  • PTC uncertainty : the repeated expiration and short-term renewal of the Production Tax Credit causes a boom-bust cycle in renewables investment. UK Renewable Obligation Certificate : the ROC was designed to incentivize the generation of electricity from eligible renewable resources in the UK by placing an obligation on electricity licensed suppliers to source from renewable resources. Spanish regulation remains strong: The energy sector is regulated at national level. The 17 Autonomous Communities, have relevant roles in the development of renewable energy. In particular, administrative procedures and provisions related to the environment, as well as the planning provisions, are developed mostly by the regional authorities. UK round 2 : The DTI (Department of Trade & Investment) concluded its Future Offshore consultation in February 2003. Its purpose was to develop a strategic framework for the offshore wind and marine renewables industries. Planning concerns (UK): Planning Policy Statement 22 replaces Planning Policy Guidance 22 (PPG22). The policies do not apply to developments for offshore renewables. Chinese markets relatively closed : China is dependent on coal, which supplies 65-70% of the country's energy needs and is responsible for a number of its energy-related environmental problems. Changes to Spanish support mechanisms : The Spanish government made the arrangement for the establishment of the new Renewable Energy Plan ( Plan de Energías Renovables , PER). The overall aim of the new Plan is to make it possible to achieve the target of 12% of primary energy being met from renewable sources by 2010. Strong domestic growth in key Indian states : Among developing countries, India was the first to establish feed-in tariffs, followed by Sri Lanka and Thailand (for small power producers only). Three states in India adopted new feed-in policies in 2004, driven by a 2003 national law requiring new state-level policies Announcement of the Spanish tariff review: The world's most successful policy mechanism for the rapid development of renewable energy is Advanced Renewable Tariffs. Germany and Spain have have used this policy to become the world leaders in the development energy. The programs in Germany, France, and Spain differentiate price by technology and within each technology, tariffs vary by project size, application, location, or resource intensity. Growing offshore in UK: Wind is one of the fastest growing renewable technologies with an annual growth rate of more than 28% in the last 10 years. US PTC renewed : This is the third expiration and renewal cycle over the past six years. I t was unclear if the Production Tax Credit would be renewed. New German EEG offshore grid support : significant incentives are given to lower the costs and increase the efficiency. The new act gives way to the expectation that the real differential costs will fall below the costs that would have arisen if the existing regime had remained in force unchanged. PTC renewal uncertainly (US): The PTC is now set to expire on December 31, 2008. As a PTC expiration approaches, major investors in the financial community stop steering capital to wind projects because of the uncertainty surrounding the tax benefits of investment. As the PTC nears expiration, developers rush to complete projects before the deadline, leading to smaller projects and added costs, which result in higher electricity prices. Aggressive growth of supply chain in China: China’s wind development value chain is evolving, with major state generators consolidating their presence while Independent Power Producers and foreign entrants seize opportunities as project owners, operators, and technical consultants. Royal Decree for rewarding the electric production by photovoltaic solar technology: in September 2008 the decree is publised and changes a new register is created and adjustments of the introductory tariff, and supplements of the basic upper limits set.
  • Renewables - Country Attractiveness Index

    1. 2. Agenda <ul><li>Country Attractiveness Indices methodology </li></ul><ul><li>Why Spain has its current position in the Country Attractiveness Indices </li></ul><ul><li>Ernst & Young network of renewable energy specialists </li></ul>
    2. 3. The All Renewables Index at February 2009 – top 10 nations <ul><li>The All Renewables Index covers a range of renewable energy technologies, with a focus on power generation </li></ul><ul><li>The Index has been running since 2003 and is now distributed to over 3,000 contacts within the industry </li></ul><ul><li>The Country Attractiveness Indices is used by Board-level decision-makers and is recognised by governments to influence policy-making (e.g. US senate hearings) </li></ul>
    3. 4. Producing the Indices Technology Factors Long-term indices 100% Renewables Infrastructure Index 35% 65% Near-term wind index 100% Long-term wind index <ul><li>Onshore wind </li></ul><ul><li>Offshore wind </li></ul>Near-term Wind Index <ul><li>Onshore wind </li></ul><ul><li>Offshore wind </li></ul>All renewables index <ul><li>Onshore and offshore wind </li></ul><ul><li>Biomass/biogas </li></ul><ul><li>Solar </li></ul><ul><li>Marine and other </li></ul>
    4. 5. Producing the Indices <ul><li>The Renewables Infrastructure index is an assessment by country of the general regulatory infrastructure. </li></ul>Access to Finance Planning & grid connection issues <ul><li>Level of political support for renewable energy </li></ul><ul><li>Level of deregulation in the power sector </li></ul><ul><li>Local support level </li></ul><ul><li>Lead time for projects </li></ul><ul><li>Grid issues </li></ul><ul><li>Maturity of renewable energy financing environment </li></ul>Electricity Market regulatory risk 29% 42% 29% Renewables Infrastructure Index (100%)
    5. 6. Producing the Indices Renewables Technology Factors (100%) Grants and Soft Loan Support (9%) Some markets use grants or soft loans in place of or in addition to tariff and tax support Resource Quality (19%) Countries with a higher natural resource score better Tax Climate (11%) Low corporate tax rates and accelerated depreciation may be enhanced for renewables Power Offtake Attractiveness (19%) Includes the price, longevity and security of support to renewables Market Growth Potential (18,5%) Analysis of publicly available data and company information to perform a market forecast per country Current Installed Base (8%) Ranks the overall capacity installed for renewable energy Project Size (15,5%) Countries where typical project size is large (>50MW for onshore wind) score higher
    6. 7. The All Renewables Index at February 2009 – top 10 nations
    7. 8. Agenda <ul><li>Country Attractiveness Indices methodology </li></ul><ul><li>Why Spain has its current position in the Country Attractiveness Indices </li></ul><ul><li>Ernst & Young network of renewable energy specialists </li></ul>
    8. 9. The past five years PTC uncertainty UK ROC uncertainty PTC renewal uncertainty Announcement of Spanish tariff review Aggressive growth of supply chain in China Royal Decree for rewarding the electric production by photovoltaic solar technology UK Round 2 offshore Planning concerns Changes to Spanish support mechanisms Growing offshore in UK New German EEG offshore grid support Spanish regulation remains strong Chinese markets relatively closed Strong domestic growth in key Indian states US PTC renewed
    9. 10. Why Spain has maintained its position over the last five years Infrastructure index* *[Relative score scale] Strong planning and grid environment driven by a number of factors: priority of dispatch for renewable technologies and strong local support Onshore wind index* Spain had installed capacity of 17GW at the end of 2008 – third largest wind fleet globally Spain is favoured by excellent wind resources Project size allows for economies of scale savings. RD661/2007 provides a stable environment and a good return for developers Electricity market risk scores well due to continuation of strong political support for renewable energy Issues over RD1578/2008
    10. 11. Supply chain development: solar Solar index* World class solar resources Recent changes to the feed-in tariff under RD 1578/2008 caused market uncertainty and 500MW cap has checked significant market growth
    11. 12. Exporting the Spanish Model
    12. 13. Agenda <ul><li>Country Attractiveness Indices methodology </li></ul><ul><li>Why Spain has its current position in the Country Attractiveness Indices </li></ul><ul><li>Ernst & Young network of renewable energy specialists </li></ul>
    13. 14. Ernst & Young network of renewable energy specialists Latvia Nauris Klava Austria Elfriede Baumann Istvan Havas Hungary Switzerland Stephan Haagmans Kamil Baj Przemyslaw Krysicki Jakub Tomczak Poland Rainer Koenig Andreas Faulmann Andreas Luecke Juliane Pinckert Robert Seiter Germany Robert Srnka Slovakia Alfonso Garcia Fuster Francisco Javier Sanchez Ramos Luigi Ragusa Gaetano Pizzitola Daniele Agostin Mary Michalopoulou George Momferratos Alexandros Fourlas Florbela Lima Jos é Gonzaga Rosa Spain Italy Greece Portugal Pascal Deisgas Jean-Christophe Sabourin Vincent Paul-Petit Daniel Benquis Martin Bowens Ian Venner Frank O’Neill Luxembourg France Ireland Lars Ansteensen Oystein Aulin Kim Richter Norway Niels Reinau Christian Aarosin Denmark Bjorn Gustafsason Torsten Lyth Sweden Kari Pesonen Jussi Tourunen Finland Jonathan Johns Ben Warren Steve Hazelton Andrew Perkins Michael Culpit Dane Wilkins Oliver Cass Jorg Hardt Mark Williamson Jim Fitzgerald Alex Brierley Arnaud Bouillé Rajaram Jamadagni Nelson Sam Alaric Marsden Jeff Gibbon Cat Watkins Justin Smallman Ian Wood Stuart Campbell Jomo Owusu James Barrett-Miles Ian Davies Martin Hayball Rachel Lawrence Luke Turney Rob Gear Mark Heuff Suzanne Edwards Robin Poole Tom Youle Phil Dominy Paul Atkinson Tom Fletcher Daniel Sausmikat Matt Williams Garauv Singh Mark Porter Mark Cornish Rob Hearn Simon Wannop UK Dietmar Laske Wolfgang Paardekooper Peter Uitbeijerse Netherlands
    14. 15. Ernst & Young network of renewable energy specialists Tim Philpotts Joseph Fontana Michael L Bernier Richard Floreani Jeff Grabow Roshni Patel Joe Muscat Anne Rabin Malaysia Eng Seng Yeo India Chaula Desai Jayesh Desai Sailesh Rao Kuljit Singh Simon Blaydes China Enrique Grotz Richard Mitchell Bassam E Hage Anne Rabin UAE Turkey Ofir Doron Israel Russell Lamb Luiz Passetti Luiz Campos Simon Hunter Paul Rowe Australia Tristan Edis Marc Newson Geoff Rumble Singapore New Zealand Canada Argentina Brazil North America Erdal Calikoglu Russia Victor Ovsyannikov
    15. 16. Thank you