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LONDON, England, August 24, 2005 (Refocus
Weekly)
Spain, the United States, Germany, India and the
United Kingdom are rated as the top five markets in the world for
wind energy.
The annual ‘Renewable Energy Country Attractiveness Indices’ is
compiled by Ernst & Young to provide a relative ranking for national
markets, infrastructure and their suitability for individual
renewable energy technologies. The main index for long-term
attractiveness has been supplemented with a near-term index to take
a two-year view with different parameters and weightings.
“Spain has grown to be a very solid market and its place at the top
of the Near-Term Onshore Wind Index is a sign of a growth boom that
is happening now and expected to be sustained over the long-term
driven by ambitious targets and strong regulatory support,” says
Jonathan Johns, head of renewable energy at Ernst & Young. “However,
a relatively closed market means most of the benefit to date, both
in terms of development and manufacturing, has been captured by
local players.”
Second-ranked U.S. “also looks set to continue its strong growth
over the next two years, assisted by the recent renewal of the
Production Tax Credit, although a lack of long-term commitment makes
supply-chain investment decisions difficult,” he adds. “While
Germany, the ‘grandfather’ of wind energy, has come in at third
place in the new indices, proving that it’s not over yet for the
ageing giant, despite a slowdown in growth rates as on-shore wind
development reaches saturation.”
The addition of the near-term indices shows that India is in fourth
place, and is moving up the ranks in the other indices. “India is a
take-off market and one to watch in the near and long-term; a GW of
growth over the last year has established India amongst the top
markets with a total installed capacity currently at over 3.5 GW.”
“The demand for new wind capacity is driven by very high energy
prices, as well as firming state level regulatory support,” he
explains. “How long the current growth boom can be sustained is
dependent on more states joining investing in wind and the ability
of grid upgrades to keep pace with wind installation.”
Investment in the UK renewable energy market is restrained in the
near-term by the pace of development, despite the fact that Britain
has a strong planning pipeline, the report explains. The country
expects to install 500 to 750 MW in 2006, compared with 1 GW for the
leaders.
“The near-term index reveals a clear gap between the ‘promise and
reality’ in the UK’s renewable energy market,” says Johns. “In the
next two years, the UK needs to deliver MW’s both on the ground and
in the sea. As the U.S. flexes its market power, manufacturer’s
attention and time is being diverted at a time when capacity is
constrained, and further impetus is therefore vital for the UK
market.”
In July, the British government proposed discounts for transmission
charges to connect the wind resource to the grid, which is
“particularly welcome and timely ... provided that action follows,”
he adds. The consultation highlighted ambiguity around the economics
of offshore electricity and generation, and Britain’s position is
lower because of this ambiguity “as the timetable for many second
round offshore projects is likely to slip into the medium-term
horizon.”
“The development of first round offshore was considerably assisted
by the availability of capital grants and some help is likely to be
needed for second round offshore, with the cost of offshore grid a
key issue,” he says. “If economics for second round offshore are not
improved then some key projects may face difficulties gaining
investment sanction.”
“It is not long ago that project financing for windfarms was a novel
concept and the number of banks active in the sector limited to a
few specialists,” he notes. “But now, as project financing for
onshore windfarms in established markets becomes increasingly ‘run
of the mill,’ the number of banks active in the market has increased
significantly.”
When combined with a general shortage of investments in energy
projects due to the current economics of building new combined cycle
gas turbine facilities, competition has increased between lenders,
tightened margins and “prompted some of the ‘pack leaders’ in
renewable energy investment to look beyond onshore wind for
returns,” he explains. “Offshore wind aside, the biomass industry is
the next likely focus in the medium-term.”
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