- US, China and India tipped to be the top three most attractive countries for renewable energy projects in the next five years
- UK continues its slide down the renewable index, displaced by Germany's strength in onshore wind and solar
- Poland, Brazil, Japan, New Zealand and Turkey enter the index for first time in its five year history

London, 9 May 2007: China and India will become the most attractive countries in the world for renewable energy investment and projects by 2012, according to the latest Ernst & Young Renewable Energy Country Attractiveness Index.

The quarterly index shows that China has climbed three places up the wind index to fifth position, while India continues to be the second most attractive country in the world for investment in wind energy.

Both countries are vying with the US for poll position – although the index shows that the US is currently the best place in the world for investor capital in renewable energy, witnessed by record inward investment by overseas utilities and a buoyant wind sector.

US joined by tiger economies

Jonathan Johns, Head of Renewable Energy at Ernst & Young, explains, "The US continues to be the global leader for investment in renewable energy. However, corporate and institutional investors have started to show a greater interest in China and India, as their economies accelerate and legislative changes are introduced that help to foster renewable energy generation."

He adds, "Despite recent predictions by the International Energy Agency that China may overtake the US as the world's biggest source of green house gasses within months, the Chinese government is showing a commitment to renewable energy sources. Its investment in renewable energy is increasing at an impressive rate, with the annual installation of wind turbines more than doubling in the last 18 months."

Activity in China has been driven by large projects and site availability and it is expected that the country's target to install 5GW of wind capacity by 2010 could be achieved within the next two years.

India's renewable energy sector is also expecting a bonus this year from forthcoming Government budgets, which will allow for tax exemptions on wind turbine production. This is in addition to recent legislation on compulsory renewable obligations, which have stipulated growth in renewable energy investment across the whole country.

UK's rich in resource but not structure

As these emerging economies continue to advance in the renewable energy sector, the UK has started slipping down the all renewable energy index from fourth to fifth over the last quarter, displaced by Germany, which continues to show strength in onshore wind and solar, and has improved off shore grid support.

Johns says that the UK with its quality and availability of indigenous resources (most significantly wind) has yet to harness its full potential of renewable capabilities, "We are rich in resource but less so in grid infrastructure," he comments.

He adds, "Although the UK has an abundance of natural resource, it has not been as successful as it could have been in harvesting this energy. The forthcoming ROC banding review will be critical to the UK's position. It is vital that we continue to foster an investment environment that supports onshore wind developers, while also providing extra help for the offshore wind and biomass sectors."

Johns says that the real question is whether or not the UK regime is ambitious enough given the recently signed European Union mandatory target for 20 per cent of all energy (fuel, heat and electricity) to come from renewable sources. He believes that the heat and fuel sectors may struggle to reach these targets and says one could argue that renewable energy requirements for electricity generation will need to rise well above the 20 per cent to compensate. "The challenge for the UK is to ensure it has both the policies and supply infrastructure in place to meet the climate change challenge," he says.

Rising stars in renewable energy

While there remains little change amongst those countries which have traditionally shown investment and growth in the renewable energy industry, the first quarter of 2007 has seen five new countries enter the renewable energy index. Poland, Brazil, Japan, New Zealand and Turkey have all joined the index for the first time in its five year history.

Johns says, "While the index is dominated by countries from the European Union, it is encouraging that the likes of Brazil and Japan are becoming attractive destinations for investors with an appetite for renewable energy. This is a clear indication that climate change is a truly global issue and that business and government are dealing with it on a global basis."

ENDS