The US has retained its position as the world leader for investment in renewable energy, according to the latest quarterly Ernst & Young Renewable Energy Country Attractiveness Index - elevated by President Bush’s annual State of the Union Address last month.
Jonathan Johns, Head of Renewable Energy at Ernst & Young, says that investor confidence in the renewable energy sector in the US has been boosted by the turning tide of political support in the US for alternative energy – in particular biofuels – and the extension of tax incentives aimed at rewarding those companies that generate energy from renewable sources, specifically wind.
He comments, “Increased political and public pressure for climate-friendly policies in the US continues to make it the most attractive destination in the world for investment into renewable energy. Wind, biofuels and solar are now key growth areas and could help reduce the country’s reliance on oil.”
Germany has seen a significant resurgence in investment potential, taking it one place up Ernst & Young’s All Renewables Index to joint fourth position with the UK. Johns says that offshore wind, bio energy and solar are likely to be major sectors attracting investment in Germany over the coming years.
Although Germany is now in equal fourth position with the UK, activity on home soil still remains strong, particularly in Scotland in the bioenergy space. Ineos plans to construct Europe’s largest biodiesel facility in Grangemouth. The project is expected to cost £70m, and to fulfil 35 per cent of the UK’s biodiesel requirements once fully operational.
Unblocking supply constraints, principally planning and grid, are critical to maintaining or improving the UK’s position. The UK passed the 2GW mark with the opening of the Braes of Doun wind farm and needs to capitalise on its pipeline of 10.2GW onshore and 5.4GW offshore projects. The Energy White Paper is keenly awaited by the industry and could have a significant effect on investment plans, particularly in relation to offshore wind and biomass, holding the prospect that the UK could overtake Italy and Denmark in terms of installed capacity in the near term.
Global investment in clean energy was estimated by commentators to surpass $100bn in 2006 for the first time: a significant milestone. Worldwide investment in renewable energy by venture capitalists, corporations, hedge funds and private equity shows there are significant returns to be made in this sector.
Commenting on the significance of this, Johns says, “Those countries with highly developed infrastructures to support renewables projects will be best placed to capitalise on this surging investment trend.”
The European Union (EU) is in a particularly good position to take advantage of buoyant levels of investment in alternative energy. Fourteen EU countries sit in the top 20 global All Renewables Index. Johns comments, “Europe is not only regarded as one of the most forward-thinking in renewable energy, but the political tools are nearly in place for Europe to take a leading role in the race against climate change.
“The European Commission’s Renewable Energy Roadmap proposes binding targets for renewable energy generation, and a minimum of 10 per cent biofuels in transport fuels by 2020. Plus the EU Emissions Trading Scheme (ETS), seemingly over its teething problems, should set the scene for a global market in emissions reductions.”
Johns concludes, “For the first time, the power of individuals and business appears to be influencing the path we take for meeting our future energy needs whilst cutting emissions and growing in a sustainable and environmentally sound manner. Climate change and the environment has become one of the biggest issues facing our planet, but is also one of the most significant business opportunities as well.
“The challenge is rapidly moving from demand to whether supply can keep up. Wind turbine and solar manufacturers are substantially increasing capacity. The evidence is that the supply chain is one of the key battle grounds of climate change, and one of the areas where M&A activity will be greatest.”
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