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August 2010

Issue 26
Renewable energy country
attractiveness indices

Global highlights
h
This issue sees the US reelinquishing its top position held since 2006 — dropping two points
In this issue: to slip behind China, effe
ectively crowning the Asian giant the most attractive market for
renewables investment. This
T follows the failure in the US Senate’s proposed energy bill to
Overview of indices 1 include a Federal Renewa able Energy Standard (RES) provision. The expiry of the treasury
The low carbon transition to the grant program after 201 10 further provides no real effective incentive mechanism for
grid parity age 2 renewable energy (RE) projects. The US wind index also fell two points, following difficulty
faced by wind developerss to obtain finance due to low natural gas prices and slack
Issue highlights – electricity demand affectting the offtake of wind power.
d bt and
debt d equity
it 6
Spain has suffered a sing
gle point downgrade largely as a result of current deliberations
M&A activity 8 regarding retroactive chaanges to photovoltaic (PV) tariffs. If implemented, these are
expected to have a signifficant detrimental impact on Spain's relative rating across the
IPO activity 9
whole renewables sectorr, reflecting the increased regulatory risk of investing in Spain.
All renewables index 10
Germany dropped a point, having finally announced cuts to solar PV tariffs, which are set
Wind indices 11 ons, given the frantic rush to install in the first half year to obtain
to stunt future installatio
Near-term wind index 12 the higher rates.

Country focus – 13 India suffered a one-poin


nt drop following the Government’s mandate to use local PV
China, US, Germany, India, Italy, manufacturers for the 222GW National Solar Mission. Indian PV module makers may not be
UK, France, Spain, Canada, Ireland, able to keep up with the surging domestic demand, impairing the country’s ability to meet
Greece, Netherlands, Poland, gy target.
its ambitious solar energ
Belgium, Brazil Q2 saw Australia increassing one point, as a result of amended RE legislation, targeting
Commentary – 20% of energy from RE, while
w committing A$652.5m (€458m) to set up an RE Future
guidance notes 28 Fund. Japan saw a one-p point increase, following a 2.6-fold growth in its solar cell market,
owing to the country’s ag
ggressive climate policies. New Zealand also rose a point, due to
Company index 30
the launch of an emissions trading scheme to curb carbon emissions.
Glossary 32
The lead article in this isssue discusses the low carbon transition to the “grid parity” age –
focusing on trends in tecchnology generation costs and electricity prices, and when the
curves might meet. This follows on from the previous issue’s article on the challenges for
renewable support mech hanisms as a result of pressures on the public purse and falling
technology prices.

A strength of Ernst & Young’s CAI research lies in the fact that Ernst & Young has a
comprehensive network of renewable energy professionals across the globe. The “Country
focus” pages utilize that local knowledge and experience, and this particular issue boasts a
record 15 contributions.
Ernst & Young was ranked the
leading project finance advisor
in the Americas, Europe, Middle
East and Africa between 2001
and 2009 by Project Finance
International

Overview of indices: Issu


ue 26
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
infrastructures and their suitability for individual technologies.
regulatory 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 wind) are referred to as These provide resource-specific assessments for each country
the “long-term indices.” The near-term wind index takes a two- (see page 10).
year view with slightly different parameters and weightings (see
right). Long-term solar index
The country attractiveness indices take a generic view, and This index is derived from scoring:
different sponsor/financier requirements will clearly affect how ► The solar PV index – 73%
countries are rated. Ernst & Young’s Renewable Energy Group
► The solar CSP index – 27%
can provide detailed studies to meet specific corporate
objectives. It is important that readers refer to the guidance Long-term wind index
notes set out on pages 28-29 when referring to the indices.
This index is derived from scoring:
Long-term indices ► The onshore wind index – 70%
The long-term indices are forward looking and take a long-term
► The offshore wind index – 30%
view, hence the UK’s high ranking in the wind index, explained
by the large amount of unexploited wind resource, strong Near-term wind index
offshore regime and attractive tariffs available under the The near-term wind index takes a forward-looking two-year view
Renewables Obligation (RO) mechanism. Conversely, although based on the parameters of most concern to a typical investor
Denmark has the highest proportion of installed wind capacity to looking to make an investment in the near term. The index is
population level, it scores relatively low because of its restricted based on separate scores for onshore and offshore wind. For
grid capacity and reduced tariff incentives. parameters and weightings see pages 28-29.
All renewables index
This index provides an overall score for all renewable energy
Comments and suggestions
technologies. It combines individual technology indices as
follows: We would welcome your comments or suggestions on
any aspect of the indices. Detailed attractiveness surveys and
1. Wind index — 68%
market reports can be provided, taking account of specific
(comprising onshore wind index and offshore wind index)
corporate objectives.
2. Solar index — 15% Please visit our website www.ey.com/renewables or
(comprising solar PV index and solar CSP index) contact either:
3. Biomass and other resource index — 17% Ben Warren: bwarren@uk.ey.com
Individual technology indices Andrew Perkins: aperkins@uk.ey.com

These indices are derived from scoring: Dane Wilkins: dwilkins1@uk.ey.com

► General country-specific parameters (the renewables Arnaud Bouille: abouille@uk.ey.com


infrastructure index), accounting for 35% Enquiries to the guest columnist Jonathan Johns should be
► Technology-specific parameters (the technology factors), addressed to mtoy@uk.ey.com
accounting for 65%

Renewable energy country attractiveness indices Issue 26 1


The low carbon transition to the grid parity age
Jonathan Johns, Guest columnist

Accepting that there is a wide degree of consensus in most All of this can be contrasted with the more planned economy in
developed countries that they need to take carbon out of their China where capacity build up is burgeoning (in some respects
economies on a relatively aggressive basis over the next 20 overly so) both in terms of generation and manufacturing, with
years, it is reasonably expected that, post recession, the long- Western manufacturers and some international developers
term prospects for the renewables industry are buoyant, vying for their slice of the pie. Small wonder that in this issue
notwithstanding pressures on the public purse and sluggish China has reached the sole number one position in the Country
growth. Attractiveness All Renewables Index for the first time, while the
position of the US shows signs of slipping further if more action
After all, renewables offer significant benefits in terms of
does not occur.
improved security of supply, a hedge against future rises in
energy costs, and for those countries prepared to make the Yet for market-based economies in the developed world, the
necessary investment, the prospect of cleantech jobs. opportunity for renewables is greater than many perceive – as
not only does fossil fuel capacity have to be replaced but also
However, the renewables industry cannot be complacent – there
there is the requirement for a huge increase in electricity
are considerable challenges in the short and medium term –
generation capacity overall as the energy market moves toward
particularly if the sector is to take a major (if not dominant)
a greater use of electricity in relation to transport and the
share of the energy mix as economies transition to a low carbon
provision of heat. The implications of this are only just being
environment.
thought through. For example, in the UK, this may lead to a
Detractors, particularly in the US, state that the cost of doubling of electricity generation in the UK by 2050
renewables puts a burden on general industry making it less notwithstanding radical measures to increase energy efficiency
competitive. Certainly this is currently making cap and trade (as set out in the recently published 2050 Pathways Analysis).
diffic lt to implement
difficult implement. The voluntary
ol ntar carbon offset market is in
For governments, the challenge may well be the extent to which
widely reported difficulty, with the COP16 global summit at
market-based solutions are able to provide the speed of change
Cancun in November regarded as challenging. The latter
and scale of investment required to achieve carbon targets — or
particularly affects projects in the developing world which are
indeed match the level of investment in China. For corporates,
often dependent on joint implementation/clean development
the challenge is likely to be whether they are able to provide the
mechanism (JI/CDM) and voluntary offsets.
levels of capital required for unprecedented growth or whether
For developed economies, it is unlikely to be sensible to base an other players will enter the market.
economy wholly on fossil fuels. As discussed in the last issue of
The potential is that electricity suppliers and generators double
the CAI, the challenge for governments in developed countries
their revenues in the next 20 to 30 years (which would, for
is to select support mechanisms that are both cost-effective for
example, move E.ON from 27th place in the Global Fortune 500
the taxpayer/consumer, while sufficiently attractive to stimulate
to 5th place). At present, many utilities are relying on joint
the vast quantities of investment required.
ventures or infrastructure and sovereign wealth funds to meet
Obtaining capital remains difficult. As some economies take the funding gap. Even these may have insufficient resources to
faltering steps to the restoration of growth, it is evident that a plug the gap – perhaps leading to the need for asset-specific
relatively high proportion of recent European projects have floats and bond issues, as was more common in the 19th
been reliant on European Investment Bank participation and in century.
the US those projects that go ahead, more often than not, are
For some of those engaged in the more emerging renewable
those which benefit from US Treasury buyouts of the Production
technologies, fiscal pressures in the West may cause difficulties.
Tax Credit/Investment Tax Credit (PTC/ITC).
Without early support, there may be a misplaced assumption by
Government involvement in finance is critical going forward, and policy-makers, that room will still be available for newer
this is exemplified by the UK Coalition Government’s welcome technologies in the marketplace even if their commercial
announcement of a Green Investment Bank as a conduit of deployment is delayed – either due to the rationing of finance
public and private finance – but on terms subject to the rigours due to fiscal pressures or intolerance of the inevitable early
of a forthcoming spending review. And the impact of tightening stage setbacks. It will require considerable resolution on the
government finances on support for renewables will be a part of policy-makers to create an
recurring theme in the coming months in many jurisdictions.

Renewable energy country attractiveness indices Issue 26 2


environment to ensure that new technologies get the support It is of concern, for example, that the US market faces an
they need when they need it. imminent crisis (certainly in wind), as the support measures
included in the first fiscal stimulus draw to a close and that the
Energy infrastructure tends to be there for the long term and
wounded PTC/ITC system – only temporarily made strong by the
once in place it has a significant incumbent advantage: with
Treasury grants alternative – will have this vital crutch taken
wind and solar installations likely to be successively replanted
away unless a new tranche is authorized or a new mechanism
on existing sites at the end of their 20-year lives. Unless some
put in place.
of the emerging technologies are supported now, they may not
be sufficiently advanced along their cost curves to supplement In the case of solar, the market is preparing for a shift from a
these core technologies in later years – with consequent effect dominant German market to other smaller hotspots, while Spain
on the achievement of long-term carbon targets. remains largely in the doldrums with the wind industry largely
thought to have won out over solar.
Even for established manufacturers, there are likely to be
winners and losers and some recognized names may well be It is surprising that talks over a climate change successor to
challenged and possibly replaced by new entrants. It may be a Kyoto do not place greater emphasis on closer harmonization
mistake for currently strong incumbents to assume that the and coordination of renewables support measures: this is at
level of market growth referred to above provides room for all – least more of a possibility as more territories adopt feed-in
not just because of strong competition from low cost Asian tariffs – and may become a necessity as the use of
manufacturers, but also because cost pressures are likely to interconnectors to transfer renewables between territories
place increased emphasis on continuous innovation – favoring becomes common. Certainly this possibly utopian goal would
those with breakthrough technological solutions which either allow manufacturers to more easily plan capacity build,
reduce the cost of the installations themselves, improve their encourage greater investment and more importantly lead to
operating efficiency, or reduce their operating costs. reduced prices per kWh and price per carbon tonne saved –
increasingly likely to be the critical factors when compared with
Hence the race to ever improve the output of solar PV by
the retail price and wholesale price of electricity.
improvement in cell efficiency and, for example, inverter design;
and the shift in the wind industry towards more reliable direct It is with this in mind that we have prepared graphs illustrating
drive gearboxes. Other than in the offshore environment, how technology trends may develop to 2030 compared with
certainly wind can no longer just rely on the benefits of scaling possible movements in electricity prices; effectively simulating
up derived from the energy being the cube of the swept blade. the path towards “grid parity”: the point at which subsidies may
no longer be required. As is the case with all simulations, an
Developed countries are tending to support higher cost, higher
open and sceptical mind is required in their interpretation. The
tech solutions such as offshore wind (in the North Sea),
central thesis envisages a relatively slow recovery into
concentrated solar power, i.e., CSP (in the US, Spain and
economic growth and takes account of learning curves for each
Australia), building integrated solar PV (France), and thin film
technology. These are regarded as relatively muted for wind, for
solar (US), as well as encouraging new technologies such as
example, compared with solar, partly due to the impact
wave and tidal (UK) and carbon capture storage (US, Europe and
improvements in PV technology have had on efficiency and
Australia). Certainly “smartgrid” is widely regarded as a priority
manufacturing techniques on cost – with the industry having an
in most jurisdictions. Biomass is likely to be more greatly
avowed intention to target costs towards US$1 (€0.8) per Watt.
exploited: subject to land availability, sustainability criteria, and
the demands of the biofuels industry (as in the case of aviation When translated into cost per kWh and compared by jurisdiction,
and haulage, it is the only viable means of decarbonization). Nor these outcomes are further affected by resource quality across
should the West assume that innovation is its prerogative; China the jurisdiction, so that, for example, grid parity is likely to be
, India, and South Korea are increasingly likely to take up the achieved in solar earlier in southern Italy than in the north. In
challenge of leading by technological as well as cost advantage. the case of onshore wind, Scotland is likely to win out over the
southeast of England.
It remains a feature of the global renewables market that
manufacturers are still required to vary emphasis from one It is also interesting to note that because so much solar power is
jurisdiction to another as the differing support regimes in each likely to be installed in the built environment (displacing
are harvested in order of their economic attractiveness. electricity consumed from the buildings on which it sits), then
Although this by-product of government support is unlikely to solar grid parity is quite likely to be judged by reference to the
change, it is not helpful for the orderly development of the retail price rather than wholesale price of electricity, with a
industry. deduction for the cost of the subsidy itself where it is recovered
as part of that price.

Renewable energy country attractiveness indices Issue 26 3


The graphs shown do not provide that degree of refinement and Wholesale grid parity – onshore wind
therefore grid parity would come slightly later than the
€140
crossover points indicate if subsidies were removed: their €120
presence is likely to be required for a transition period as they €100
€80
provide not just pure economic support but an incentive to
€60
change rather than stay with the status quo. €40
€20
Retail grid parity – solar PV €0

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
€350
€300
€250 Onshore wind max Onshore wind min
€200 Onshore wind average UK
€150 Italy Germany
€100 Spain US (California)
€50 US (New York)
€0
Wholesale grid parity – offshore wind
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

€250
Solar PV max Solar PV min
Solar PV average UK €200
Italy Germany €150
Spain US (California)
US (New York) €100
€50
Wholesale grid parity – solar PV €0
010
011
012
013
014
015
016
017
018
019
020
021
022
023
024
025
026
027
028
029
030
€350
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
€300
€250 Offshore wind max Offshore wind min
€200 Offshore wind average UK
€150
Germany Spain
€100
€50 US (New York)
€0
In the case of larger scale renewables, such as wind, where
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

power tends to be remote from the point of use, grid parity is


Solar PV max Solar PV min more likely to be judged in relation to the wholesale price (the
Solar PV average UK wholesale price shown does tend to exclude the cost of
Italy Germany
renewables support itself).
Spain US (California)
US (New York)
An exception to this generalization is that, in the case of
Wholesale grid parity – solar CSP biomass and energy from waste, there are many examples
emerging where plants are used to provide power for industrial
€300
€250 processes such as whisky distilleries and cement and aluminium
€200 plants.
€150
€100
To date, legislators (perhaps with the exception of India) have
€50 not encouraged the widespread industrial ownership of
€0 renewables generation capacity in remote locations. A net
metering arrangement which allows businesses to own
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

generation sufficient to meet their own needs with charges for


Solar CSP max Solar CSP min transmission and balancing, could in the medium to long term
Solar CSP average Italy
facilitate substantial business engagement in the
decarbonization of the energy markets. It would also provide
Spain US (California)
much needed inflows of capital and would facilitate the
transition towards grid parity, as the investment trigger point
would be at a price closer to business retail rather than
wholesale price.

Renewable energy country attractiveness indices Issue 26 4


Grid parity rankings based on technology and cost type
Retail grid parity Wholesale grid parity
Rank Solar PV Solar PV S
Solar CSP Onshore wind Offshore wind
Country Year Cost type Country Year Cost type Country Year Cost type Country Year Cost type Country Year Cost type
1 US (New York) 2012 Max Italy >2030 Average US (Californ
nia) 2025 Min UK 2017 Min US (New York) >2030 Average
2 US (California) 2012 Min US (California) >2030 Min Spain 2027 Min Italy 2017 Average Germany >2030 Average
3 Germany 2014 Max US (New York) >2030 Max Italy >2030 Average US (New York) 2020 Average UK >2030 Min
4 Italy 2014 Average Germany >2030 Max Germany 2025 Max Spain >2030 Average
5 UK 2015 Max Spain >2030 Min Spain 2027 Average
6 Spain 2017 Min UK >2030 Max US (California) 2030 Max

The analysis indicates that in the case of PV, retail grid parity In the case of the solar sector, prices continue to fall – with the
may be reached generally between 2012 and 2015, with the US level of buoyancy or otherwise in Germany the key factor going
to the fore and the UK having the prospect of parity in 2015 if forward. As mentioned above, solar in the built environment
retail electricity prices rise as shown. Surprisingly, this is also has the advantage that investment decisions will tend to be
achieved ahead of Spain because of much lower retail prices triggered by retail price rather than wholesale price parity. For
anticipated there. However, if solar is judged by the harsher test other technologies, the ability of businesses to benefit from net
of wholesale parity, then it is not achieved until about 2030 in metering, even if the owned plant is remote, would provide a
Italy – with solar CSP achieving parity a few years earlier, similar spur.
between 2025 and 2027 in California and Spain.
As policy-makers plan the transition to a low carbon economy in
In the case of onshore wind, the UK and Italy show signs of the period to 2030 and as far as 2050, they are likely to reflect
achieving parity around 2017, with other countries such as on the timing of grid parity and the possibility of decoupling
Germany and Spain not achieving it until at least 2025. In incentive mechanisms for established technologies – with
reality, even in the UK, offshore wind is unlikely to achieve grid residual support directed towards emerging technologies if
parity on current cost trends until beyond 2030. There is clearly countries
t i are reliant
li t on them
th for
f the
th fifinall push
h ttowards
d
a great prize for innovation in the offshore sector – which still decarbonization. It is inevitable that comparison with the cost of
has the benefit of being able to scale up. If cost reductions nuclear and carbon capture storage will form part of this
occurred at the rate of 7.5% (2012-15) and 5% (after 2015) debate.
compared with the assumed 5% (2012-15) and 2.5% (after For renewables as a whole, it is premature to say that
2015), then grid parity for offshore wind would be brought decoupling from incentive mechanisms is an immediate
forward to 2025 for the UK. prospect, but it is on the horizon. For example, if uncertainty
Of course, the above analysis can only be indicative. It remains in financial markets at the point of crossover then
illustrates the increased value of renewables to economies with support measures may still be required at parity prices to
high underlying energy costs, such as Italy and New York – provide contractual certainty for bank finance.
provided the renewable technologies or the policy mechanisms Moreover, if technology costs rise again due to inflationary
used to support them are not disproportionately responsible for pressures from commodity price increases or supply chain
such costs which could occur where incentives are additional to constraints, then grid parity will be delayed – not inconceivable
the wholesale electricity price. It also illustrates the importance given the vast increase in the demand that could occur from an
of choosing those renewable technologies best able to take aggressive electrification of the heat and transport sectors.
advantage of the natural resource in a particular country – and,
most importantly, for all technologies to continually reduce But one day grid parity will come, and through the low carbon
costs if they are to achieve the desired levels of penetration. transition the renewables industry will have come of age.

In the wind sector, reductions in the price of turbines are


currently occurring due to excess capacity, partly caused by a
decline of the US market and partly due to low gas prices (as
shale gas facilities come on stream). Price reductions of 10% to
15% are reported with further reductions anticipated next year
as the US market is likely to remain depressed. However, these
reductions have not yet clawed back all of the price inflation Sources

that occurred pre-recession. Generation cost: HSBC, IEA, Renewable UK, Roland Berger, Ernst & Young
analysis
Electricity price: HSBC, DECC, Ernst & Young analysis

Renewable energy country attractiveness indices Issue 26 5


Issue highlights
Debt markets Global power bonds issued by country
Project finance deal flow stabilises 80 (65.5)

Global bonds issued US$b (€b)


The financial crisis has dramatically impacted the availability of 70 (57.4)
finance for renewable energy projects, causing many projects to 60 (49.2)
be delayed or cancelled since 2008. 50 (41.0)
However, recent data from Infrastructure Journal suggests that 40 (32.8)
US$13.7b (€11.2b) of renewable energy deals closed in H1 10,
30 (24.6)
up 6% on the same period in 2009. Although well below the 20%
plus annual growth posted before the financial crisis, this 20 (16.4)
perhaps marks a turning point in the health of the sector. 10 (8.2)

Global renewable energy project finance deals 0)

40 (32.8) Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210


Value of deal US$b (€b)

35 (28.7)
30 (24.6) United States France China
25 (20.5) Germany Japan Italy
20 (16.4) United Kingdom Spain Sweden
15 (12.3) Source: Thompson One Banker
10 (8.2)
5 (4.1)
0) Competing for bank funds
2005

2006

2007

2008

2009
2005 H1
2005 H2

2006 H1
2006 H2

2007 H1
2007 H2

2008 H1
2008 H2

2009 H1
2009 H2

2010 H1

Financial institutions are likely to focus on the following aspects


when determining where to invest in the Renewable sector:
► Pursuing lowest credit risk opportunities; lenders are
Source: Infrastructure Journal Project Database favoured disproportionally by capital adequacy ratios when
lending to low risk, stable cash flow and highly secured
The ongoing shortage of liquidity promotes a continued
corporates
corporates.
flight to quality
It is important to realize, that although the renewable energy ► Achieving shorter-term lending commitments; while
project finance market seems to have stabilised, a funding gap amortization profiles may stretch over long periods, debt is
continues in the debt markets, particularly in developed being committed for short terms only, promoting refinance
economies, where recent banking stability had been based on risk.
sovereign guarantees and central bank liquidity. ► Maximizing ancillary wallet income; in particular, within the
Established asset classes that demonstrate robust and high energy sector the value of foreign exchange, interest rate
credit quality of cash flows, such as mature renewable energy and commodity derivatives.
technologies, like onshore wind are likely to be benefactors from
► Aligning overall portfolio exposure; lenders look to balance
the flight to quality. For example, the past 12 months have seen
their portfolio of assets and combat over exposure, thus
a surge in wind power project financings in China and solar PV in
even attractive transactions in the renewable sector could
Germany.
struggle for liquidity should a lender be significantly
For less proven technologies, such as offshore wind, in Northern committed to competitors or peer group borrowers.
Europe in particular, project finance has begun to play a more
significant role. However, sponsor strength and financial Recent market stability is sustaining lending
support remain critical for successful financings. The Lincs £1b
► Despite the crises in the sovereign debt markets, the
(€1.2b) offshore wind farm project financing launched in August
underlying cost of fixing Libor (shown in graph overpage)
2010, which includes construction risk, will be a significant test
remained stable in H1 10, with rates cheaper than those
of the limits of the project finance market.
achievable in 2008. Combined with extremely low central
Bond markets to the rescue? bank rates in most developed countries, renewable energy
An analysis of power sector bonds issued in the last eight projects which can secure lending are finding that funding
quarters shows two main trends. Firstly, from a peak achieved costs remain at manageable levels without the need for
in Q1 09, global power sector bond issues have dropped increased subsidy. This is unlikely to remain the case, as the
significantly from over US$73b (€59.8b) per quarter to US$20b graph overpage shows — spreads on short- and long-term
(€16.4b) per quarter. Secondly, trends of issuers by country debt have been steadily widening since Q1 09.
show that although the US is the largest issuer of power bonds,
emerging economies are increasing their share of the total.
European utilities issued 40% of total bonds (nearly €150b) in
the period. Their share of the total has fallen sharply from
nearly 60% in Q1 09 to just 15% in Q2 10. This indicates that
utilities with constrained balance sheets, in Europe in particular,
are issuing less bonds despite continued significant investment
requirements.

Renewable energy country attractiveness indices Issue 26 6


Issue highlights
US, UK and Euro short- and long-term swap rates from ► Government liquidity pools; global selected examples evident
January 2008 – July 2010 in the market include:
► The €45m FIDEME renewable investment fund is a public-
7
private mezzanine fund open to French SMEs who face
6
5
debt/equity gaps.
% rate

4 ► IFC Green Bonds: launched April 2010 to support


3 renewable financing requirements. The inaugural bond
2 raised US$200m (€163.9m).
1
► Bond issuance; in particular growth, in unrated bond
0
issuance remains active — SolarWorld AG raised €400m in
Nov-08

Nov-09
Jan-08
Mar-08
May-08
Jul-08
Sep-08

Jan-09
Mar-09
May-09
Jul-09
Sep-09

Jan-10
Mar-10
May-10
Jul-10
the unrated bond market in the first half of 2010.
► Private equity and venture capital; funds raised during the
boom period remain liquid and hold access to committed
UK short UK long US short funds from limited partners.
US long Eur short Eur long
Source: Bloomberg, Ernst & Young analysis Equity markets
Utilizing alternative sources of capital Renewable energy and indices performance
Large corporates increasingly tend to favour the bond markets 1.60
to fund renewables and other investments. However, increasing 1.40
pressure on constrained balance sheets, combined with ever- 1.20
growing capital expenditure programmes, are pushing 1.00
corporates to look to alternative sources of funding. In 0.80
particular, the need to protect credit ratings is critical. The 0.60
following graph shows major utilities have suffered significant 0.40
downgrades to their ratings in the past decade or so. 0.20
US investor-owned
investor owned utilities bond ratings
Jun-07
Aug-07
Oct-07
Dec-07

Apr-08
Jun-08
Aug-08
Oct-08
Dec-08

Apr-09
Jun-09
Aug-09
Oct-09
Dec-09

Apr-10
Jun-10
Feb-08

Feb-09

Feb-10
- as rated by Standard & Poor's

100%
80% FTSE 100 NEX (Wilderhill)
Nasdaq HSBC Climate Change Index
60% MSCI (Asia ex Japan) MSCI China Broad
40% MSCI AC Europe
20% Source: Ernst & Young analysis
0%
Since the low point of the recession in early 2009, clear regional
At 12/31/2001 At 12/31/2009
differences have emerged during the course of the recovery. The
Below BBB- BBB- BBB BBB+ A- A or higher changes clearly display Asia’s (particularly China’s) head above
Source: Edison Electric Institute the rest while recovering from the economic downturn. With the
recession particularly intense in Europe, it is not surprising MSCI’s
There are a number of sources of alternative funding for
Europe Index remains at the lower end of the spectrum. The
renewable energy developers emerging:
Nasdaq has proved to be more resilient, outperforming the FTSE-
► Private placements; utilizing a restricted group of liquid
100 and most other indices as the US gained confidence during
investors who are looking to provide financing to low risk
renewable sector corporates, for example, Canadian firm 2009 and early 2010. Contrasting this, however, are the NEX
OPEL international raised US$7.6m (€6.2m) in July via Wilderhill and HSBC Climate Change indices, which have found
private placement. This trend echoes wider popularity of the the journey out of recession more difficult. The HSBC index has a
product during the recent bank market downturn. higher weighting of Asian companies and thus has performed
Global US private placement issuance across all sectors better than the NEX.
Amount US$b (€b)

6 (4.9)
In the last quarter, sovereign debt concerns in the eurozone soon
4 (3.3) spread elsewhere, and all markets have taken a dip. The
challenge now for renewable energy companies is to “turn the
2 (1.6)
corner” again towards profitability and attractiveness – and to
0) carry out this transformation despite public sector spending cuts
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec and the risk of a “double-dip” recession.
2008 2009 2010
Source: Ernst & Young analysis

Renewable energy country attractiveness indices Issue 26 7


M&A activity
AES Corp. has strengthened its presence in Europe following its GE Energy Financial Services has acquired a majority equity
acquisition of a 51% stake in Polish wind developer 3E from its stake in a 183MW portfolio of 11 wind projects currently under
owner Jan Reichert. The deal means that AES Wind Generation construction in the US state of Idaho. The near US$500m
will take a 95% stake in 353MW of potential wind farms in (€409.7m) portfolio of wind farms has been developed by
Poland, as well as obtaining a development pipeline totalling Exergy Development Group.
775MW. Completion of the entire pipeline would require
ERG Renew, Italy’s renewable energy company, has agreed to
approximately US$175m (€143.4m) of AES equity through the
buy IVPC Power 5 in a deal valuing the Italian unlisted wind
end of 2014.
power operator at €224m. The deal will allow ERG Renew to
Siemens Energy has announced a deal that will see the boost its 2013 installed wind power capacity target to 530MW
company take a 49% stake in Danish installation services from a previous 428MW.
supplier A2SEA, a specialist in the construction of offshore wind
ABB, Swiss engineering group, announced plans to acquire US-
farms. Siemens will pay approximately €115m for the new
based smart grid software developer Ventyx (from investor
shares in A2SEA, which will be paid in two instalments in 2010
Vista Equity Partners) in a bid to improve its network
and 2011. Dong Energy will continue to be the company’s major
management business. The deal is reportedly worth more than
shareholder and the funds are expected to help expand A2SEA’s
US$1b (€819m) and is expected to close at the end of 2010.
installation capacity.
With Ventyx having reported sales of US$250m (€204.8m) in
SuedWestStrom (SWS), an alliance of local energy suppliers in 2009, ABB expects the deal to enhance revenues between 9%-
southern Germany has agreed a deal to buy 70% of a 400MW 12% over the next two years.
wind farm from BARD Energy. The BARD offshore project is set
to become the first commercial wind farm in the German North
Sea when it enters service at the end of 2011. SWS itself
invested around €500m,
€500m with a further €1b coming from
abroad.

China Huaneng Group, the country’s largest power producer,


announced that it has agreed to buy 1.8GW of wind capacity
from six domestic suppliers. According to Bloomberg reports,
the Beijing-based firm signed framework agreements on 23 May
worth CNY8.06b (€1b) with Sinovel Wind Group, Shanghai
Electric Group, Dongfang Electric Corp, China Shipbuilding
Industry Corp and Zhejiang Machinery and Electrical Group.

Private equity firms FE Clean Energy and International Finance


Corporation (IFC) are investing US$50m (€41m) in Bhilwara
Energy Limited (BEL) for a 10.8% stake. FE Clean and
Washington-based IFC are investing US$25m (€20.5m) each.
The deal values the Noida-based firm at around US$465m
(€381m). The funds will be used for investing in projects in India
and Nepal.

Dong Energy has sold its entire stakes in two Norwegian energy
companies, Nordkraft and Salten Kraftsamband, to the Troms
Kraft Group for a total of US$329m (€269.5m). It received
DKK1.1b (€147m) for its 33% stake in Nordkraft and DKK900m
(€121m) for its 24% stake in Salten Kraftsamband. Dong said
its rationale was the difficult regulatory environment
surrounding hydroelectric projects in Norway. It also said it
preferred to focus on the development of wind assets rather
than hydropower.
Sources
All information relating to M&A activity in the sector is obtained from publicly
available sources.

Renewable energy country attractiveness indices Issue 26 8


IPO activity
Chennai-based Orient Green Power Company Ltd plans to raise
INR9b (€158m) through initial public offer (IPO) in July to part-
finance its INR44b (€775m) capex plan. It aims to boost
renewable energy fivefold over the next two years to just over
1GW.

Renovalia, a Spanish renewables developer, plans to raise as


much as €153m by issuing 33.3m shares. It said it will float 25%
of its share base, in Spain’s first IPO of a renewable power
company in more than two years.

Clenergen India, a subsidiary of US-based renewable energy


company Clenergen Corporation, is proposing to come out with
an IPO in the first quarter of 2011 to raise approximately
INR1.3b (€22m) to part-fund its 32MW biomass power project
that is coming up in southern Tamil Nadu.

Akfen Holding, a Turkey-based construction-to-energy group,


confirmed that it planned to offer 29.2% of the company’s stock
in a public offering to be held this year. Within its three
subsidiaries, Afken Holding has a portfolio of about 20 licensed
hydropower projects under development.

Brazilian renewable energy company Renova Energia has


resumed plans for an IPO on the BM&F Bovespa Stock Exchange
following a derailed IPO attempt earlier this year. The new
offering could raise BRL229.5m (€105m) for the company. By
comparison, the maximum value of the cancelled IPO was
estimated at BRL867.9m (€396.8m) (almost four times the
current IPO).

Enel, Europe’s most indebted utility, aims to raise about €4b


through its listing, as part of efforts to cut its debt to €45b by
the end of 2010. A host of major Italian and international banks
are pitching this week to win the mandate for what is set to be
Europe’s largest IPO this year with a market capitalization of
€10b or more. Enel’s CEO said the plan is on track for an IPO in
October 2010.

Sources
All information relating to IPO activity in the sector is obtained from publicly
available sources.

Renewable energy country attractiveness indices Issue 26 9


All renewables index at August
A 2010
All Wind Onshore ore
Offsho Solar Solar Biomass/ Geo- Infra-
Rank1 Country renewables index wind wind
d index Solar PV CSP other thermal structure2
1 (1) China 69 75 78 67 59 66 40 57 51 74
2 (1) US3 67 68 72 56 72 71 74 62 67 61
3 (3) Germany 63 65 63 71 55 66 22 63 54 62
4 (4) India 62 63 71 42 65 66 62 58 44 63
5 (5) Italy 61 62 65 53 65 67 59 56 66 67
5 (5) UK 61 67 64 77 38 51 0 59 38 70
7 (7) France 58 60 62 56 53 64 24 58 30 62
8 (8) Spain 56 57 62 42 64 63 68 50 33 55
9 (9) Canada 53 60 65 46 32 44 0 49 34 62
10 (10) Portugal 51 54 58 42 48 57 22 45 32 56
10 (10) Ireland 51 58 58 57 26 36 0 48 28 61
12 (12) Greece 50 52 56 41 55 60 41 41 32 52
12 (12) Australia 50 50 54 41 54 57 46 45 59 53
14 (12) Sweden 49 52 52 53 32 43 0 55 34 51
15 (15) Netherlands 47 53 51 57 34 47 0 40 21 43
16 (16) Poland 46 51 54 42 32 43 0 42 23 47
16 (16) Belgium 46 52 50 57 31 42 0 39 28 52
16 (16) Brazil 46 47 51 35 41 46 30 48 22 46
19 (19) Japan 45 45 48 39 51 61 25 35 40 49
20 (19) Denmark 44 47 44 56 29 40 0 45 32 51
21 (21) Norway 43 48 49 45 22 30 0 44 30 49
22 (22) New Zealand 42 47 51 36 24 32 0 34 50 45
23 (22) Turkey 41 43 46 35 39 43 28 36 43 44
24 (24) South Africa 40 43 46 34 37 34 44 34 31 41
25 (25) Austria 37 34 46 0 40 54 0 49 34 52
26 (26) Czech Republic 35 33 45 0 40 55 0 38 30 41
27 (26) Finland 34 35 34 37 19 26 0 49 23 37
Notes: Source: Ernst & Young analysis
1. Ranking in Issue 25 is shown in brackets
2. Combines with each set of technology factors to produce the individual technology indices
3. This indicates US states with RPS and favorable renewable energy regim
mes

This issue sees the US suffering a two-point drop, to fall behind Q2 saw Australia increasing one point, following the Australian
China, following failure to include a Federal RES provision in the Senate passing an amended renewable energy legislation,
Senate’s proposed energy bill. Construction of new RE targeting 20% of energy from RE. The two-part Renewable
developments is also expected to stagnate following the Energy Target is effective from 1 January 2011. The
expiration of the treasury grant program at the end of 2010 Government also committed A$652.5m (€458m) over four
with no news of renewal, thus providing no real effective years to set up a Renewable Energy Future Fund. However,
incentive mechanism. doubts still remain whether the new Government will establish a
national market for trading carbon emissions.
Germany also dropped a point, having finally announced cuts to
solar PV tariffs, which are set to stunt future installations, given Japan saw a one-point increase, following a 2.6-fold growth in
the frantic rush to install in the first half of the year to obtain its solar cell market in the financial year to 31 March, owing to
the higher rate before the announcement. the country’s aggressive climate policies. The Government
confirms it will maintain feed-in tariff (FiT) support in the current
India suffered a one-point drop following the Government’s
fiscal year.
mandate to use local PV manufacturers for the 22GW National
Solar Mission (NSM). Indian firms’ solar output is relatively small New Zealand rose a point, following the launch of an emissions
and may be insufficient given the big targets. Despite this, India trading scheme in a bid to curb carbon emissions. As a result,
could float special bonds to generate funds for the Jawaharlal energy, transport and manufacturing industries will have to pay
Nehru NSM. for their emissions of gases which is expected to have a knock-
on effect in boosting RE deployment in the country.

Renewable energy country attractiveness indices Issue 26 10


Wind indices at August 2010
2

Rank1 Country Wind index Onshore wind Offshore wind Near-term wind
1 (1) China 7
75 78 67 81
2
2 (2) US 6
68 72 56 76
3 (3) UK 6
67 64 77 54
4 (4) Germany 6
65 63 71 52
5 (5) India 6
63 71 42 54
6 (6) Italy 6
62 65 53 46
7 (7) Canada 6
60 65 46 45
7 (7) France 6
60 62 56 46
9 (9) Ireland 5
58 58 57 41
10 (9) Spain 5
57 62 42 46
11 (11) Portugal 5
54 58 42 38
12 (12) Netherlands 5
53 51 57 37
13 (12) Sweden 5
52 52 53 34
13 (14) Belgium 5
52 50 57 37
13 (15) Greece 5
52 56 41 40
16 (16) Poland 5
51 54 42 39
17 (17) Australia 5
50 54 41 40
18 (18) Norway 4
48 49 45 33
19 (19) Denmark 4
47 44 56 34
19 (20) New Zealand 4
47 51 36 32
19 (20) Brazil 4
47 51 35 35
22 (22) Japan 4
45 48 39 27
23 (23) South Africa 4
43 46 34 36
23 (23) Turkey 4
43 46 35 32
25 (25) Finland 3
35 34 37 23
26 (26) Austria 3
34 46 0 31
27 (27) Czech Republic 3
33 45 0 31
Notes: Source: Ernst & Young analysis
1. Ranking in Issue 25 long-term wind index is shown in brackets
2. This indicates US states with RPS and favorable renewable energy regim
mes

In Q2, China increased a point following Chinese Government In contrast, Italy‘s onshore wind potential score has increased,
aims to launch 90,000MW of wind capacity by 2015. China also following EDF Energies Nouvelles’ commissioning of Italy's
started generating power from its first pilot offshore wind largest wind farm at 99MW installed capacity.
project at East China Sea bridge with capacity of 100MW. China
Spain dropped a point, following a 35% cut in subsidies expected
will invite public bidding for more offshore wind power projects
for the wind energy sector over a 30-month period. This is said
in the next five years to reach an installed offshore wind-power
to save the Government as much as €1.2b in reduced subsidy
capacity of 5GW by 2015.
payments. Despite this, Spain’s Aragon region approved a bill to
US fell a further two points in the Wind index, following low foster 1GW wind power for commercial start-up beginning in
natural gas prices and slack electricity demand, which give 2013.
utilities “no incentive to sign long-term contracts” with wind-
Brazil has risen a rank as the Brazil commission approved a 10%
farm developers. Without those PPAs, developers are having
renewables target for 2018, which effectively brings the
difficulty obtaining funding. Only 539MW was installed in Q1,
previous target forward four years. This follows the two
marking the lowest first quarter of new capacity since 2007.
renewable energy auctions held in August. The national energy
Despite substantial growth identified in Q1, India has dropped a research company has registered 517 companies for
point, following the Government having cut its five-year target participation with a combined capacity of 15.8GW.
for new wind energy generation from 11GW to 9GW, in light of
the global economic slump.

Renewable energy country attractiveness indices Issue 26 11


Near-term wind index at August 2010
Rank1 Country Wind index The US fell one point following news that offshore wind plans
1 (1) China 81 could be delayed because the agency that issues permits to
2 (2) US2 76 projects is overloaded and being revamped because of the
3 (3) India 54 ongoing Gulf of Mexico oil spill. US near-term wind development
3 (4) UK 54 is also expected to suffer the knock-on effect of the treasury
5 (5) Germany 52 grant scheme expiry as mentioned in the All renewables index.
6 (6) Spain 46
6 (7) Italy 46 The UK climbs a rank to tie with India, following the Crown
6 (7) France 46 Estates’ announcement of 2GW of offshore capacity extensions
9 (9) Canada 45 to Rounds 1 and 2. Able UK, owner of Humber port, plans to
10 (10) Ireland 41 create £400m clean energy supply base on the south bank of
11 (12) Greece 40 the Humber estuary, which includes building facilities for making
11 (11) Australia 40 offshore turbines. Q2 also saw Vattenfall producing the first
13 (12) Poland 39 power to the grid from its 300MW Thanet offshore wind farm,
14 (14) Portugal 38 currently the word's largest offshore wind farm. Dong Energy’s
15 (15) Netherlands 37 172MW Gunfleet Sands offshore wind farm has also been fully
15 (15) Belgium 37 commissioned.
17 (17) South Africa 36
18 (18) Brazil 35 Greece increased a point following a recent legislative bill aimed
19 (18) Sweden 34 at accelerating the development of renewable energy sources,
19 (20) Denmark 34 which includes relatively generous boosts to wind energy FiTs,
21 (21) Norway 33 easing of permitting process, promoting the use of industrial
22 (22) Turkey 32 land for clean energy projects, etc.
22 (22) New
N Z
Zealand
l d 32
Sweden’s score suffered following the big debate around the air
24 (24) Austria 31
force requesting wind farms not be built within a 40km radius
24 (24) Czech Republic 31
from air force bases, which limits wind power build-out
26 (26) Japan 27
potential. The issue is yet to be resolved.
27 (27) Finland 23

Notes: Source: Ernst & Young analysis


1. Ranking in Issue 25 is in brackets
2. This indicates US states with RPS and favorable renewable energy
regimes.

Renewable energy country attractiveness indices Issue 26 12


Country focus – China
National targets Wind
Ranking Issue 26 Issue 25 Wind energy generation capacity in China is forecasted to grow
All renewables index 1 11 at an annual rate of 36% by the close of 2010, comments
Long-term wind index 1 1 National Development and Reform Commission’s vice minister
Near-term wind index 1 1 Zhang Guobao.
Source: Ernst & Young analysis
The Government aims to launch 90,000MW of wind farms by
1. Joint
2015 in order to cut the country’s greenhouse gas (GHG)
Targets emissions.
The Chinese Government has set out its renewable energy Nevertheless, China’s wind power industry suffers from
targets for 2020 to help cut carbon emissions per unit of GDP distribution imbalances between resources and markets, and
by up to 45% of 2005 levels by that time. China aims to reach difficulties in connecting wind farms to the national grid. The
an installed capacity of 300GW of hydro, 70GW of nuclear, wind farms are being planned and built in the remote west, but
100GW of wind and 20GW of solar capacity by 2020. The the power market is in the east and south.
targets are expected to reduce carbon emissions by 1.38b
tonnes annually. Corporate news

China aims to develop renewable and nuclear energy with the China Longyuan Power Group Corp. plans to spend about
goal of increasing the share of non-fossil fuels in total primary CNY92b (€11.1b) over the next five years to become the
energy consumption to 15% by 2020. world’s No.1 wind-power producer. The Hong Kong-listed
company aims to install at least 16,000MW of wind turbines in
In 2009, of the overall national energy capacity, 7.8% included China and overseas by 2015.
nuclear, solar and wind power systems in the non-fossil
category.
t

Markets
Chinese regulators have ordered a freeze on some initial public
share offerings in the renewable energy sector, amid fears that
overcapacity will weigh on the rapidly growing industry.

Solar
China plans to develop 13 solar power projects in the western
region as part of a Government aim to cut emissions and boost
energy investment in the area. The Government is tendering for
bids to develop the projects in six provinces, which will have a
combined capacity of 280MW.

Biomass
China needs CNY413.5b (or roughly €49.9b) in investments
over the next 10 years to harness its biomass energy potential
in rural areas, said Asian Development Bank (ADB). If livestock
manure and crop stalks were converted into clean fuel, it could
provide electricity to around 30m rural people in China who are
still dependent on kerosene lamps for lighting, the report said.

Contact:
Ivan Tong
Tel: +86 10 58153373
Email: ivan.tong@cn.ey.com
Ben Warren
Tel: +44 (0)20 795 16024
Email: bwarren@uk.ey.com

Renewable energy country attractiveness indices Issue 26 13


Country focus – US
Energy legislation – continued uncertainty In order for a panel to be considered “bankable”, lending
institutions stress a strong history of module performance and
Ranking Issue 26 Issue 25
operational longevity. In short, though prices are dropping,
All renewables index 2 11
those manufacturers that are “racing to the bottom” in terms of
Long-term wind index 2 2 price are not likely to be the long-term winners.
Near-term wind index 2 2
Source: Ernst & Young analysis Barack Obama announced in his weekly speech on 4 July that
1. Joint his stimulus plan would forward US$1.45b (€1.2b) to Spanish
Policy company Abengoa Solar, which is to build the biggest thermal
solar plant in the US, and one of the biggest in the world.
Industry groups are in an uproar over the failure of the recently
Abengoa has announced two new renewable projects in the
proposed energy bill in the Senate to include a provision for a
United States. It plans to invest €2.09b in building the 280MW
Federal Renewable Energy Standard (RES).
Solana thermal solar plant in Arizona, and the 250MW Mojave
While the successful 1603 treasury grant program has spurred Solar plant in California, at roughly US$4-5m (€3.3-4.1m) per
renewable energy development during 2009 and 2010, the lack MW.
of a Federal RES is expected to result in the stagnation of new
California regulators have approved a 20-year solar power
construction after the expiration of the 1603 grant at the end of
contract between the utility Southern California Edison (SCE)
2010.
and Solar Millennium for two 242MW solar-thermal power
The issue of the RES and climate bill is as of yet unresolved and projects. A total of up to four 242MW – power plants can be
not finalized and is unlikely to be passed in 2010. built there, which together would supply electricity of 2.2m
MWh per year and would save roughly 900,000 tonnes per year
Access to finance
of carbon dioxide.
US Department of Energy (DOE) also states that it will issue
US$200m in grants over the next five years for solar and water Wind
power research and logistics. The department will provide up to Cape Wind (a proposed 130 turbine offshore facility) is a storied
US$125m (€102.4m) over five years for manufacturing-related project that has encountered a number of hurdles in its history.
research projects on solar panels; up to US$40m (€32.7m) over The requirement to obtain numerous Federal, state and local
three years for solar PV supply chain programs; and up to approvals has historically stymied the progress of its
US$39m (€32m) over four years for research into hydropower development.
technologies.
However, in May of 2009, state and local approvals were
Solar project developer SunEdison has secured a financing obtained through the issuance of an overriding permit from the
package projected to reach as high as US$1.5b (€1.2b) to install Massachusetts Energy Facilities Siting Board. In May 2010,
solar power at businesses and utilities. SunEdison and First Interior Secretary Ken Salazar publicly approved the project
Reserve, a private equity firm that invests in energy, announced federally and stated that it would be “the first of many projects
a joint venture to finance, build and operate solar PV projects. up and down the Atlantic coast.”
The initial investment in the joint venture is US$167m
Vestas Wind Systems, the world’s largest manufacturer of wind
(€136.8m), and First Reserve may later raise another
turbines, hopes to compete against General Electric from its
US$150m (€122.9m) in equity.
pole position in the US market with a US$1b (€0.82b)
Solar investment. The news comes, as Vestas resumes production at
its plant in Colorado, because of an order valued at US$2.9b
The price of solar panels continues to drop. Panel prices have
(€2.4b) to deliver and maintain up to 2,100MW in turbines in
fallen approximately 9% from this time last year and
North and South America and Europe for Portugal-based EDP
approximately 16% in the past two years.
Renovaveis. The Danish company’s US investment will include
However, it is becoming clear that price is not necessarily hiring 2,000 employees and ramping up production in Colorado
driving the marketability of solar panels. Panels that are to 3,000MW per year of turbines.
perceived to be “bankable” by lending institutions are being
Contact:
chosen for projects though these panels often come with a
higher price tag. Michael Bernier
Tel: +1 617 585 0322
Email: michael.bernier@ey.com

Renewable energy country attractiveness indices Issue 26 14


Country focus – Germany
y
FiT cuts Recent noise measurements at Alpha Ventus showed that
installation of monopoles was on average 160dB above the
Ranking Issue 26 Issue 25
average noise level allowed by BSH. The list of applications
All renewables index 3 3
affected includes recently unveiled North Sea developments
Long-term wind index 4 4 from SSE Renewables (looking to build three 80-turbine farms)
Near-term wind index 5 5 and a series of 400MW BARD projects.
Source: Ernst & Young analysis
Multibrid has reported issues with its six M5000 turbines
Solar installed at Alpha Ventus. The reason was due to the use of zinc
aluminium alloy instead of a white metal used for the
German lawmakers have finally passed an amendment to the prototypes. Under heat, the zinc-aluminium alloy tends to
Renewable Energy Act that introduces a 13% cut in feed-in expand and can cause blockages in the system. As a result, two
payments for rooftop PV plants, along with 8% and 12% out of the six (and potentially the remaining four) turbines will
reductions for stand-alone plants. Cuts to solar feed-in tariffs have to be removed and refurbished on land.
have been deliberated for several months but the bill has now
Since Vattenfall has closed the Dan Tysk transaction and SWS
been adopted after being recently stalled in Parliament.
has acquired shares in BARD Offshore 1, many other
Plans for sharp reductions in solar subsidies have generated a transactions are currently coming to the market. On the sell
boom in solar activity in the first half of this year with over side, the drivers for the progress are developers seeking to
3.4GW of newly installed capacity. From the 1 July, depending spread their risk through reducing stakes in existing
on the type and size of the system, subsidies will be reduced by investments and investing further in new developments. It is
8%-13%, with a further 3% cut following in October (see table understood that some foreign investors are reconsidering their
below). investment into the German offshore market.
FiTs are sett to
FiT t further
f th decline
d li nextt year but b t it is
i nott yett clear
l by
b Specifically, SSE wants to divest its offshore wind farm portfolio
how much. Due to the significant growth in installed capacity in in Germany because command payments in the UK with
the first half of this year, it is expected that the future decline in €0.18/KWh are significantly higher than in Germany and
FiT will be substantial. therefore UK projects are more lucrative.
The solar sector accepts the FiTs for solar power are too high On the buy side, there is still a healthy appetite on the side of
but argues for more moderate cuts to avoid sharp disruptions municipals and city utilities buying minority stakes in offshore
within the industry. wind parks. This is driven by strategic targets to reduce the
share of CO2 producing assets in the own generation portfolio.
From 1 July From 1 October
Open space FiTs Onshore wind
Commercial space 25.02 ct/kWp 24.26 ct/kWp
After failing to meet the 2010 deadline for revising old turbines
Conversion areas 26.15 ct/kWp 25.37 ct/kWp
in order to benefit from the SDL bonus (Systemdienstleistung),
Rooftop FiTs
this deadline has been extended until March 2011. With this
Up to 30kWp 34.05 ct/kWp 33.03 ct/kWp
extended duration, the German Government wants to enforce
Over 30kWp 32.39 ct/kWp 31.42 ct/kWp
the integration of wind power into the German grid.
Over 100kWp 30.65 ct/kWp 29.73 ct/kWp
Over 1,000kWp 25.55 ct/kWp 24.79 ct/kWp
FiTs for solar plants on agricultural land will be abolished
Source: BSW - German Solar Federal Association

Offshore wind
Thousands of MW of potential wind farm projects off Germany Contact:
are on hold pending completion of critical species and habitat Dr. Frank J. Matzen
protection measures. The German Federal Office for Tel: +44 (0)207 951 0331
Environment (BSH) has said it must finish its investigation into Tel: +49 6196 996 25259
Email: frank.matzen@de.ey.com
the effects of noise and foundation issues before significant
progress can be made on applications. Dr. Florian Ropohl
Tel: +49 40 36132 16554
Email: florian.ropohl@de.ey.com

Renewable energy country attractiveness indices Issue 26 15


Country focus – India
Government support and policy initiatives Solar power projects totaling 300MW have been proposed for
development at six locations in the state of Karnataka.
Ranking Issue 26 Issue 25
Karnataka Power Corp (KPC), a state-owned power enterprise,
All renewables index 4 4
will select JV partners who will pick up 75% equity with KPC
Long-term wind index 5 5
holding the rest.
Near-term wind index 31 3
Source: Ernst & Young analysis Supply chain
1. Joint
With the boost given by the semiconductor policy and the recent
Policy and development – solar Jawaharlal Nehru National Solar Mission (JNNSM) by the central
The Indian Government, as part of the National Solar Mission, Government, the country is set to witness a significant progress
released the guidelines and incentives in June 2010 for (i) off- in domestic solar PV production. The Indian Government has
grid and decentralized solar applications and (ii) rooftop solar given “in-principle” approval to 12 out of the 15 investment
PV installations and small solar generation. proposals received under the semiconductor policy. Out of this,
six projects for setting up solar cell manufacturing have
For the first scheme, the financial support would be through a
achieved financial closure.
combination of one or both of a 30% subsidy and a 5% interest
bearing loan. Solar PV systems up to a maximum capacity of The semiconductor policy is aimed at promoting semiconductor
100 kWp per site and off-grid and decentralized solar thermal and solar PV manufacturing. It offers a capital subsidy of 20%
applications would be eligible. For mini-grids for rural for manufacturing plants in Special Economic Zones (SEZs) and
electrification applications, projects up to a maximum of 250KW 25% to those outside SEZs. The subsidy is based on the
per site would be considered. condition that the net present value of the investment should be
at least INR10b (€176b). Many large players in the country are
The second scheme is to promote rooftop solar PV and other
making investments in solar PV manufacturing targeting
smallll solar
l power plants,
l t connectedt d to
t the
th distribution
di t ib ti network
t k domestic as well as the export markets.
at voltage levels below 33kV. The Government support would be
in the form of generation-based incentives (GBI). The GBI would Wind
be the difference between the tariff determined by the Central
Indian oil refining and marketing company Hindustan Petroleum
Electricity Regulatory Commission (CERC) and a base rate,
(HPCL) plans to set up wind farm projects of 100MW in a
which has been fixed at INR5.5 per KWh (€0.09 per KWh) for
phased manner. It has given an order of 25.5MW (17 units of
financial year 2010-11. The developers for these projects are
1.5MW each) to Suzlon Energy Ltd. The Centre for Wind Energy
likely to be chosen by end of August 2010.
Technology (CWET) has released the Indian Wind Atlas with an
The Government has also announced the migration of 16 objective to provide data for evaluating the potential of wind
projects to the National Solar Mission to set up 84MW of solar- energy at various locations in India. This would act as an
based power generation capacity. Out of this, 50MW would be extremely useful guide for developers and investors.
based on Solar PV and 30MW on solar thermal technology. The
project size ranges from 1MW to 10MW. Eleven out of the 16
projects would be in the state of Rajasthan, 3 in Maharashtra
and 2 in Punjab. The allocations for new projects under the
National Solar Mission would be done shortly.

The state of Maharashtra has directed power-distribution


license holders to obtain 0.25% of their electricity from solar
power. This makes it the first Indian state to establish a solar Contact:
component as part of the nation's annual renewable purchase Sanjay Chakrabarti
obligation. The 0.25% solar purchase obligation will operate for Tel: +91 22 4035 6650
three years starting this fiscal year, which began in April, and Email: sanjay.chakrabarti@in.ey.com
will rise to 0.50% for the subsequent three years to FY2015-16. Sudipta Das
Regulatory authorities in other states are expected to require Tel: +91 33 6615 3400
power distributors to purchase solar-generated electricity. Email: sudipta.das@in.ey.com
Jitesh Khatrani
Tel: +91 22 6749 8137
Email: jitesh.khatrani@in.ey.com

Renewable energy country attractiveness indices Issue 26 16


Country focus – Italy
Regulatory support and FiT reduction Plants under construction that are completed before the end of
2010 will have the possibility, if grid connected before June
Ranking Issue 26 Issue 25
2011, to recur to the “old” FiT.
All renewables index 51 51
Long-term wind index 6 6
Even if the new tariffs are appreciably lower than existing ones,
the approval of the new Conto Energia is a very important signal
Near-term wind index 61 71
Source: Ernst & Young analysis
for the National PV Operators. Conto Energia has proven to be
1. Joint extremely effective in boosting the PV diffusion. Since 2005,
when the FiTs for PV started, more than 95,000 plants have
Policy and planning
been installed with an overall capacity of 1,450MW, 800MW of
The Italian National Renewable Energy Action Plan (NREAP) was which has been installed in the last 12 months.
submitted at the beginning of July to the European Commission.
The plan outlines the development strategy to determine how
Wind, biomass, hydro
Italy will achieve the target of 17% of total energy consumption Article 45 of the New Financial Law foresaw the elimination of
provided by renewable sources. To comply with the provisions the obligation for the GSE (Gestore Servizi Energetici, i.e.,
of the Directive 28/2009/EC, the plan outlines an expected 29% Energy Services Management Authority) to withdraw excess
of gross final consumption will be covered by renewable energy green certificates from the market. Most of the operators
by 2020.This consists of 15GW capacity from hydro, 1GW for claimed that the effect of this measure would have been a
geothermal, 4.6GW for biomass, 16GW for wind and 8.5GW for collapse of green certificate price, placing new investments in
solar plants. wind, hydro, geothermal and biomass plants at risk.
National guidelines for renewable energy were approved by the Finally, an amendment to the New Financial Law has been
State-Regions Conference on 8 July. Guidelines define the approved and GSE will continue to purchase the surplus of green
authorization process for renewable energy plants. The main certificates However
certificates. However, the expenditure incurred by GSE in 2011
goal of the guidelines is to harmonize the regulatory framework will be reduced by 30% compared with 2010, providing that at
for plant authorization in the entire national territory. Regions least 80% of this reduction comes from the containment of
and local authorities will have to incorporate the guidelines into excess green certificates.
their legislation within 90 days after their official publication.
Access to finance
Solar
The EIB will provide medium- to long-term finance of
In Italy the end of the FiT for PV (Conto Energia) was scheduled US$860.7m (€705.1m) with Italy’s Intesa Sanpaolo Group for
for the 31 December 2010. After months of waiting by Italian-based SMEs and organizations with projects in energy,
operators and investors, the new Conto Energia was approved environment and infrastructure sectors.
by the Conference State-Regions on 8 July. The final approval
AES Solar Energy secured US$37.1m (€30.4m) of financing to
from the Government is expected sometime in Q3.
fund an 8MW project in Puglia.
PV systems completed after December 2010 will receive
reduced incentives compared with the old Conto Energia. Tariff Corporate news
reductions will range between 10% and 25% for systems EDF Energies Nouvelles announced the comissioning of a
installed on buildings and between 13% and 27% for other project financed 98.9MW wind farm facility, Italy’s largest, in
plants. Reductions will take place every 4 months during 2011 Sardinia.
and every 12 months from 2012 onwards.
Etrion highlighted its interest in acquiring 30MW of solar
projects in Italy for US$55.5m (€45.5m).

Contact:
Roberto Giacomelli
Tel: +39 331 6744229
Email: roberto.giacomelli@it.ey.com

Renewable energy country attractiveness indices Issue 26 17


Country focus – UK
New coalition government and wind development Solar
Ranking Issue 26 Issue 25 The arrival of FiTs in the UK will trigger a fivefold increase in
All renewables index 51 51 demand for solar PVs. Market analysis of the UK’s solar PV
Long-term wind index 3 3 market predicts the industry will need to deliver 1,000MW of
Near-term wind index 31 4 installed capacity by 2015 – marking a 30-fold increase in its
Source: Ernst & Young analysis current size.
1. Joint
Wind
Politics
The UK Government will go ahead with over £72m (€88.9m) of
The Conservative-Liberal Democrat coalition indicated their
funding for offshore wind projects announced under Labour.
strong support for renewable energy expansion in a 12 May
post-election statement outlining their plans that included An extra 2GW of offshore wind power is to be added to waters
support for renewables FiTs, banding the Renewables Obligation surrounding the UK after the Crown Estate, the owner of rights
Certificates (ROCs) quota program to give more ROCs to to the seabed, unveiled extensions to Round 1 and Round 2
nascent technologies and creating a green investment bank (as projects. The additional capacity would provide enough
mentioned in the previous issue). electricity to meet the needs of up to 1.4m homes in the UK.

Nevertheless, there is still a significant level of uncertainty The largest offshore wind farm in the world, with 300MW,
about the future of renewables policies, which causes some owned by Swedish utility Vattenfall has produced its first power
discomfort for investors. to the grid. Additionally, Dong Energy's 172MW Gunfleet Sands
offshore farm in the Thames Estuary has been fully
The coalition has cut funding for low carbon programs, including
commissioned and is now supplying electricity to the national
reducing funding for offshore wind development and the UK
grid.
g
C b T
Carbon Trust.
t Th
The C
Carbon
b T Trustt will
ill receive
i £12.6m
£12 6 (€15.6m)
(€15 6 )
less money from a budget of around £100m/year. The offshore Biomass
wind capital grants scheme, the low carbon technology program
The Department of Energy and Climate Change (DECC) outlined
and a geothermal grant program will have their budgets reduced
in July its support for the next two decades of “straight
by a total of £6.9m (€8.5m), while £5.4m (€6.7m) will be
grandfathering”, i.e. guaranteed renewables support for
eliminated by the early closure of the bio-energy capital grants
technologies. This important go-ahead for bioenergy projects
scheme and the energy saving trust.
should release some £13b of private capital into the industry.
In its June budget, the Government suggested it may introduce This welcome result for the industry illustrates a shift in attitude
FiTs for large-scale renewable projects, such as offshore wind towards further encouragement from DECC.
farms and marine energy, and could keep the ROC or existing
The exception of supporting bioliquids such as combined heat
projects only.
and power (CHP) fuel or landfill waste substances somewhat
Access to finance minimizes the news, but the highlighted interest in the field
should lead to further progress. The assurance of return to
The Co-operative Bank says it will double its funding for
investors should catalyze interest in a business that has
renewable projects, lending £200m (€246.9m) this year to
remained dormant over the last eight months.
renewable projects, up from £100m (€123.5m) in 2009.
Wave
Infrastructure
Wave energy developer Aquamarine Power has unveiled the
The Government pledged to build a power distribution grid
design of its Oyster 2 wave energy converter, which will be built
offshore, removing one of the barriers to expanding wind and
in Scotland. The new 800KW device will deliver 250% more
tidal energy planning to new plants to generate electricity.
power than the original Oyster 1. It will be another step on
building the world’s first commercial wave farm.

Contact:
Ben Warren
Tel: +44 (0)20 795 16024
Email: bwarren@uk.ey.com

Renewable energy country attractiveness indices Issue 26 18


Country focus – France
Policy and regulation Wind
Ranking Issue 26 Issue 25 France is committed to meeting 23% of its final energy
All renewables index 7 7 consumption from renewable resources and aims for 25% to
Long-term wind index 71 71 come from wind power, with installed onshore capacity set to
Near-term wind index 61 71 rise from 4.4GW in 2009 to 19GW by 2020. Despite these
Source: Ernst & Young analysis ambitious objectives concerning the development of wind
1. Joint energy production, the Law imposes new constraints on the
Policy wind energy sector.

On 28 June 2010, the French Parliament adopted the Grenelle Grenelle 2 makes widespread changes to administrative
2 Environmental Law, which details the Government’s measures processes for approving renewable energy projects, including
to improve energy efficiency, protect the environment and reducing administrative requirements for onshore and offshore
reduce CO2 emissions The policies follow previous Grenelle wind projects. The Government dropped its proposal of a
Environment plans and debates, that took place in 2007 and are minimum 15MW – threshold for new onshore wind farms
articulated around the following six main thrusts: energy following protests from the industry, but it won approval in the
efficiency, transportation, energy consumption decrease, bill a five-turbine minimum threshold for new wind farms. Now,
renewable, waste risk management, and environmental in order to benefit from the FiT, wind power plants must now
governance. comprise at least five turbines.

One of the key measures to promote renewable energy Until the Law was adopted, the benefit of the wind energy FiT
production is the implementation of regional climate, air and system was reserved to wind farms installed within the so-called
energy schemes (SRCAE). The SRCAE are regional renewable “zones de développement de l’éolien (ZDE)” which are set up by
energy plans to be drawn up by the Préfets of the region and the Préfet. The Law sets forth that a Pursuant ZDE is no longer
shall define the regional objectives with respect to energy required for offshore wind facilities.
control, determine the options available to reduce air pollution, In addition to the building permit procedures (including the
and determine objectives to achieve valuation of ground energy carrying out of an environmental study and a public inquiry),
potential. Each region of France is to set up a SRCAE within one wind turbines with a tower higher than 50 meters will also be
year as from the date of publication of the Law and an subject to the “industries classified for the protection of the
assessment of the scheme will be made after five years. environment” regulations and procedures. The Law provides
Solar that this new regulation shall not apply to building permit
applications made before the listing of wind turbines
Article 33 of the Grenelle 2 Law validates the three Ministerial installations as industries classified and for which the public
Orders of 12 January and 15 January 2010 that govern the inquiry opening order was already passed.
solar PV FiT benefit for electricity generated by solar PV plants.
The Law also stipulates that wind turbines shall only be installed
These orders were challenged before the administrative courts
at least 500 meters away from houses and apartment flats or
on the grounds that the prior consultation requirements had not
areas which could be used for habitation.
been complied with and the new FiTs were immediately
enforceable against the applications made under the previous
order dated 10 July 2006.

Grenelle 2 also allows the public to install solar panels and


receive subsidized rates for power sold back to the grid. Solar
panels in homes must be connected to the grid within two
months, under the law.

Contact:
Jean Christophe Sabourin
Tel: +33 1 55 61 18 55
Email: jean.christophe.sabourin@ey-avocats.com

Renewable energy country attractiveness indices Issue 26 19


Country focus – Spain
Regulatory uncertainty Wind
Ranking Issue 26 Issue 25 Spain installed more than 2,500MW in 2009 reaching a wind
All renewables index 8 8 energy capacity nationally of 19,000MW (almost half of the
Long-term wind index 10 91 total energy capacity).
Near-term wind index 61 6 Due to registration rules, the sector has suffered a paralysis.
Source: Ernst & Young analysis
However, the agreement reached between the industry and
1. Joint
Spanish Wind Energy Association should help to resolve the
Commercial confidence in Spain has been undermined by situation. Under this agreement, the premiums for wind energy
Government plans to cut subsidies to the renewable sector. will be cut by 35% in the benchmark premium till 1 January
Currently, Spain has a green-energy capacity of 40,050MW. 2013.
Despite the expected cuts in subsidies, the sector foresees a Main companies : Iberdrola, Acciona, Gamesa.
strong growth for the near future with national output targeted
at 84,794MW for the year 2020. PV

Policy There are more than 3,500MW of solar PV already installed due
to the FiT scheme and consequently the PV boom in 2008.
In order to reduce both dependence on foreign oil and carbon
emissions, the Spanish Government authorized a generous FiT The agreement for premium cuts for wind energy in Spain was
scheme, creating strong wind and solar PV markets. relatively easily reached. This is not the case for PV and it is still
not clear which cuts may be coming in Spain’s compensation
This led to a flood of investments causing a bubble effect system for PVs. The Government is also investigating
(investors achieving 15% IRRs under a Government guarantee). irregularities under the 2008 FiT plan as there are installations
Although g the Government introduced a new pre-registration
p g that were connected under false or misleading circumstances.
circumstances
system for future renewable projects and reduced the regulated The latest news on this is that the Government may offer
tariff, this did not stop the tariff deficit. pardon to the plants with anomalies if they are willing to accept
A €20b electric tariff deficit presents the Government with a less beneficial rates.
different series of challenges: securitization of utilities debt Main companies: Fotowatio, T-Solar, Solaria.
after the credit crunch, managing of the phasing out of the
nuclear energy, carbon subsidies, behavior of petroleum, Thermosolar
natural gas, coal prices, etc. Currently Spain operates 432MW of thermosolar capacity but
Given the current economic climate, the Government is today there are 100 applications for thermosolar power plants
reviewing bonuses presently granted to renewable energies. totaling 4,300MW of capacity.
There are ongoing talks with the industry about retroactive cuts To prevent a bubble from emerging as observed in the PV
in tariffs. sector, the Government has decided that new plants will be
In addition to industry associations and investors concerns, the subject to a tariff-premium moratorium during the first year of
banking sector has also raised its voice, given the risks faced by operation, while an undisclosed number of projects are to
renewable projects which are highly leveraged. experience starting delays. As in the wind sector, there will also
be a cap on the number of hours in which thermo solar plants
Due to the uncertainty of the tariff regime, companies had to
are eligible to obtain rates above market prices.
postpone their planned IPOs (i.e., Renovalia and T-Solar) and
are looking to invest in other markets such as the US, Latin Main companies: Abengoa, Acciona, ACS.
America or Italy. To rectify this, the Government is working on
the implementation of measures in order to ensure future
stability.
Contact:
Eva Abans
Tel: + 34 93 366 38 05
Email: evamaria.abansiglesias@es.ey.com
Victor Duran
Tel: + 34 91 572 73 50
Email: victor.duranschulz@es.ey.com

Renewable energy country attractiveness indices Issue 26 20


Country focus – Canada
Project developments and technology spectrum Solar PV
Ranking Issue 26 Issue 25 In Ontario, the Ontario Power Authority (OPA) introduced a
All renewables index 9 9 new price category within the microFiT program, which
Long-term wind index 71 71 stimulates renewable energy projects under 10kW. The OPA
Near-term wind index 9 9 change reduced the rate for ground mounted solar PV projects
Source: Ernst & Young analysis from a previous CAD802/MWh (€627/MWh) to CAD588/MWh
1. Joint (€460/MWh).
Grid The new price category has been seen as a way to ensure
Part of a series of cooperative energy sector initiatives between microFiT applications are made by residential or small
the New Brunswick and Nova Scotia Governments, Nova Scotia businesses, as originally intended, and to cool a potentially
Power announced it intends to develop a 345-kilovolt power line overheating market – the microFiT program has already
between Nova Scotia and New Brunswick. The line has an received 16,000 applications following its launch last October.
estimated CAD200m (€156.3m) capital cost and would improve Staying in Ontario, under the FiT program (for projects greater
grid stability and reliability between the two provinces. than 10kW) significant activity and development is ongoing. This
Onshore wind issue saw a deal between SunEdison and TransAlta. SunEdison
acquired the rights to continue developing and construct a
Onshore wind news saw provincial utility Hydro-Quebec receive 10MW solar PV project, approved under the former Renewable
bids from 16 development companies for 44 projects, totalling Energy Standard Offer Program (RESOP), and a second
1,051MW, from its third call for tenders, originally seeking development site for a future FiT program project.
500MW of wind capacity. The call sought community-based
projects and those developed by local First Nations. Hydro- In supply chain news, German headquartered Asola announced
Quebec will now begin work selecting projects, still aiming to a joint venture with Evergreen Power Ltd to build a facility in
meet tender deadlines, stating that projects need to reach Ontario producing 30MW of PV modules per annum.
commercial operation date between December 2013 and Biomass
December 2015.
In Nova Scotia, the previously announced 650,000 tpa/60MW
Projects will receive a price of CAD125/MWh (€97.7/MWh), biomass co-generation facility being developed by Nova Scotia
indexed annually from 2009 at 100% of CPI. Power Inc and NewPage Port Hawkesbury Corp started an
Meanwhile in Alberta, Suncor Energy has gained approval from approval hearing with Nova Scotia’s Utility and Review Board. If
the Alberta Utilities Commission to build its 88MW Wintering approved, the project could generate c.3% of Nova Scotia’s total
Hills Wind Power project, 125km from Alberta’s largest city of electricity requirement.
Calgary. While in neighboring province New Brunswick, eight applications
The project will deploy 55 1.6MW turbines with construction for access to Crown forest biomass feedstock have been
expected to start imminently and a commercial operations date awarded. The allocations total 1.3m cubic meters per annum of
planned for the end of 2011. feedstock and will be developed alongside existing pulp and
paper mills.
Moving further west to British Columbia, Capital Power, the
young subsidiary of Alberta-based Epcor Utilities, appointed Emerging technologies
Vestas to provide 79 turbines for its 142MW Quality wind
River flow turbines have been deployed in the St Lawrence river
project.
by Quebec-based RSW RER Ltee following investment from the
Turbines are planned for delivery and installation in 2012. federal Government of CAD2.8m (€2.2m) and the Quebec
Government of CAD3m (€2.4m). The remaining CAD18m
(€14m) is being invested by Groupe RSW Inc, parent company
of RSW RER Ltee.

Contact:
Mark Porter
Tel: +1 416 943 2108
Email: mark.porter@ca.ey.com

Renewable energy country attractiveness indices Issue 26 21


Country focus – Ireland
New technologies and market growth Geothermal
Ranking Issue 26 Issue 25 GT Energy, has entered into a Technology Partnership
All renewables index 101 101 Agreement (TPA) with Electricity Supply Board International
Long-term wind index 9 91 (ESBI), under which GT Energy will generate up to 50MW of
Near-term wind index 10 10 electricity using geothermal energy by 2020, and ESBI will
Source: Ernst & Young analysis assist the company with the design of the generating equipment
1. Joint and grid connection. These would be Ireland's first geothermal
Policy electricity generation projects, adding renewable generation
capacity and assisting in meeting Ireland's renewable energy
The report Renewable Energy in Ireland published by requirements.
Sustainable Energy Authority of Ireland (SEAI) reveals that the
share of electricity generated from renewable energy sources in Wave
2009 was 14.4%, two-thirds of which was wind, ensuring that Energia has signed a preliminary off-take agreement with the
Ireland is well on track to fulfil Government targets on pioneering US firm Ocean Energy Systems (OES). The
renewable electricity this year. electricity will initially be generated from a development test
Infrastructure site off Belmullet, Co. Mayo, where the Sustainable Energy
Authority of Ireland (SEAI) and OES are jointly developing a
The Irish Government, the Electricity Supply Board (ESB) and Wave Energy Converter prototype. The prototype will be
the Renault-Nissan Alliance have announced a comprehensive capable of generating 12MWh of electricity each day.
partnership that involves the development of a nationwide
electric car charging infrastructure by ESB, the supply of Biomass
electric cars by the Renault-Nissan Alliance from 2011, as well The Government has unveiled FiTs for bio-energygy schemes that
as Government policies and incentives that will support the will provide a guaranteed support price of between €0.15/KWh
widespread adoption of such vehicles. The Irish Government’s (USD 0.18/KWh) and €0.085/KWh (USD0.10m). The tariffs are
target is for 10% of Ireland’s vehicles to be electric by 2020. to be offered on a 15-year basis and apply only to anaerobic
Wind plants up to 50MW, and biomass CHP up to 100MW. For
biomass combustion until 31 December 2015, the tariffs apply
Bord Gáis Éireann, the semi-state energy operator, published to plants up to 160MW, and from 1 January 2016, there is no
details regarding the company’s investment strategy including limit on capacity.
the imminent opening of the new Whitegate Power Station and
the successful acquisition of wind energy company, SWS, in late
2009. Bord Gáis is now positioned to produce up to 1,500MW
of electricity generating capacity over the next few years. The
previously reported €500m investment in SWS will see a major
rollout of wind farms between now and 2013.

Additionally, Tra Investments, a subsidiary of Lee Strand Co-


operative, announced that its €23m wind farm project in North
Kerry has just become fully operational. The 16 turbine 13.3MW
wind farm is located on three sites between North Kerry’s
Stacks Mountains and Castleisland.

Contact:
Maurice Minogue
Tel: +353 (0)21 4805700
Email: maurice.minogue@ie.ey.com

Renewable energy country attractiveness indices Issue 26 22


Country focus – Greece
New legislation for renewable energy Major investors already present in the Greek market include
Spanish Iberdrola, Gamesa and Acciona, France’s EDF and
Ranking Issue 26 Issue 25
Veolia, Italy’s Enel and Germany’s WPD and WRE.
All renewables index 121 121
Interconnected Non-interconnected
Long-term wind index 131 15
Energy prices €o/MWh system islands
Near-term wind index 111 121
Onshore wind parks 87.85 99.45
Source: Ernst & Young analysis
1. Joint Source: Government Gazette
Policy Offshore wind
A much-awaited legislation providing a more favorable legal and The new legislation provides, for the first time, specific
economic framework for renewable energy was passed by Greek provisions on offshore parks which is a new and underdeveloped
Parliament in June. Policy-makers hope the bill will accelerate market in Greece.
the development of RES and related projects through important
amendments to the licensing procedure and the FiT scheme. A strategic environmental assessment study will set out the
location characteristics, as well as installed capacity of offshore
The licensing process has been simplified by reducing the parks. Following approval of the environmental terms and
number of consultation institutions and therefore significantly issuance of license, a public tender will be procured for the
reducing the approval time line for renewable energy construction of the park and its connection with the network,
investments. The estimated time for approval is now as little as with full or partial concession of its exploitation for a defined
8-10 months compared with the previous estimation of 3-5 time period.
years.
Solar
FiTs have increased compared with previous ones, and have
b
been sett depending
d di on the
th technology,
t h l reinforcing
i f i smallll With a PV-installed
PV installed capacity
capacit of 36MW at the end of 2009,
2009 the
projects and technologies with multiple advantages (e.g., small market is expected to develop at a faster pace due to the new
solar units, biomass, biogas). The tariffs are now among the legislation. However, it should also be noted, that as of February
highest in Europe and are guaranteed for 20 years. 2010 solar PV investments do not benefit from Government
capital grants.
The commitment on addressing climate change through the
development of RES is set out by this law as a national priority. International companies that have already invested in the Greek
The national energy consumption target for RES is set at 20% by solar sector include Conergy and WPD from Germany, EDF-EEN
2020 (instead of 18% provided by EU Directive 28/2009), while from France, Babcock and Brown from Australia and Iberdrola
the same target for electricity consumption is set at 40% by from Spain.
2020.
Access to finance
Onshore wind
The question remains as to whether Greece will be able to
New legislation supports the need to increase the installed wind sustain the level of subsidies for RES given the economic
capacity to meet EU targets. The total installed wind capacity adversity that the country is facing.
for 2009 was 1,087MW. This represents 8% of the total country The economic situation is additionally affecting developers’
capacity and about 90% of RES. access to financing. The recent consecutive sovereign debt and
The wind resources in Greece are considered attractive, with a bank creditworthiness downgrades are making funding scarce
profile of more than 8m/s and 2,500 wind hours in many parts and more expensive.
of the country. The elimination of the administrative uncertainty
for project developers as well as the long-term favorable FiT
scheme, ensure an encouraging future for wind energy
investments.

Contact:
Georgios P Smyrnioudis
Tel: +30 210 2886 461
Email: georgios.p.smyrnioudis@gr.ey.com

Renewable energy country attractiveness indices Issue 26 23


Country focus – Netherla
ands
Elections and energy policy Grid capacity
Ranking Issue 26 Issue 25 In July 2010, Dutch transmission system operator TenneT
All renewables index 15 15 announced that if all plans for generation plants were realized, a
Long-term wind index 12 121 total 16.6GW of newly installed capacity will be available by 2017.
Near-term wind index 151 151 The company also said that it expects a sharp increase in wind
Source: Ernst & Young analysis power capacity from 2.3GW in 2010 to 6GW in 2017.
1. Joint
TenneT was also recommended by the Dutch Task Force for
Policy and regulation offshore wind to be made responsible for integrating the offshore
After the Dutch parliamentary elections in June 2010, the pro- electricity transmission. This would allow for more rational
nuclear People’s for Freedom and Democracy (VVD) party development of the offshore grid and implicitly force
emerged with the most seats. The new Dutch Government is most developments into certain locations. In addition, the Government
likely to be formed in a right-wing (minority) coalition of two or is expected to propose legislation by the end of 2010 setting out
three parties centered around the VVD. Analysts expect that the enforceable guidance on where offshore wind farms can be
energy policy of the new Government will increase its focus on located in order to optimize grid connection costs.
nuclear energy rather than energy from renewable sources. The
Offshore wind
new Government is also expected to approve the construction of
a second nuclear reactor in the Netherlands, as investments in In May 2010, as part of the second tendering round for offshore
offshore wind farms are considered relatively expensive. wind, the Government announced that two projects, BARD
Offshore (300MW) and GWS Offshore (300MW) won the
Renewable energy in the Netherlands is sponsored through the
Government subsidies and will receive guaranteed FiT for a fixed
Stimulering Duurzame Energie (SDE) incentive scheme. The SDE
period of 15 years. Both projects are located 56km off the
system is a hybrid one that provides a top-up
top up subsidy per unit of
northern
th D
Dutch
t h portt off E
Eemshaven
h and
d will
ill be
b developed
d l d by
b the
th
output generated to compensate for the difference between the
Germany-based BARD Group.
SDE fixed reference tariff and the actual gray spot price in the
market. The Government has neither indicated the size of the subsidy it is
granting, nor the remainder of the €5.3b budget. The total size of
The total SDE budget for 2010 is estimated at €7.4b of which
the granted projects (600MW) is 350MW less than the initial
€5.3b is dedicated to offshore wind. The future of the SDE
rollout target of 950MW installed capacity. The long-term target
scheme is uncertain, as the political parties with majority seats in
for offshore wind installed capacity in the Netherlands is set at
the new Dutch parliament contemplate terminating or modifying
6,000MW by 2020.
the subsidy program.
At present, the Netherlands receives offshore wind power from
As an initiative from the previous Government, the Far and Large
two wind farms, Egmond aan Zee (180MW) and Princess Amalia
Offshore Wind (FLOW) project was developed for the purpose of
(120MW), which started operations in 2006 and 2008
reducing investment costs of offshore wind farms. The research
respectively.
project was initiated in September 2009 as a joint effort between
RWE Offshore Wind, Eneco, TenneT, Ballast Nedam, IHC BARD has two months to sign an agreement with the Government
Merwede, Van Oord, 2-B Energy, XEMC Darwin, Energy Research regarding the outcome of the tender. The company would need to
Centre in the Netherlands and Delft University of Technology. The pay a fine of €20m per wind farm if the construction does not
purpose of the project is to reduce development and maintenance commence before August 2013. In addition, the Government is
costs of far-shore wind farms by 20% by 2015. The project starting negotiations with the unsuccessful bidders to see whether
involves the construction of a demonstration wind farm with 20- they are interested in receiving lower subsidies than they tendered
60 wind turbines with an installed capacity of 100-300MW. In for.
May 2010, the Ministry of Economic Affairs sponsored the project For the complete list of the unsuccessful bidders, please refer to
with a grant of €19.5m, thus matching the initial investment of Issue 24 of the Renewable energy country attractiveness indices.
the consortium.

Contact:
Diederik van Rijn
Tel: +31 88 407 8775
Email: diederik.van.rijn@nl.ey.com

Renewable energy country attractiveness indices Issue 26 24


Country focus – Poland
Access to finance and grid development In accordance with the Environmental Information Disclosure
and Environment Protection Act, an environmental approval is
Ranking Issue 26 Issue 25
required for planned investments which may significantly impact
All renewables index 161 161
the environment, such as a new power generating unit. An
Long-term wind index 16 16 environmental assessment report is required for investments of
Near-term wind index 13 121 this nature and its preparation may last about nine months.
Source: Ernst & Young analysis Issuing of the environmental approval typically lasts
1. Joint
approximately three months.
Access to finance
Offshore wind
In accordance with the Regional Development Ministry’s
decision, the resources assigned to the Infrastructure – Offshore wind power industry constitutes a vital element of the
Environment Operational Program for RES have been increased Baltic Sea’s future development; in accordance with the EU
by the sum of PLN112.7m (€27.1m) to PLN310m (€74.6m). Offshore Grid Project, this industry could reach 500MW capacity
Meanwhile, the co-financing application intake finished in May by 2020 in Poland. In its optimistic projections, the Polish
2010, resulting in 160 projects submitted, 65 of which are wind Institute for Renewable Energy (IEO) estimates that the offshore
energy projects. wind power production in Poland is going to reach the level of
4.5TWh in 2020. However, Poland has unclear legislative basis
The European Investment Bank (EIB) is loaning Poland €50m to regulating the construction of installations of this nature. A
co-finance renewable energy and energy efficiency projects. EIB number of projects have been developed but none reached full
said the fund will be spent on increasing power and heat permission.
production through biomass and biogas fired plants. The
projects will be partially funded by the US$80m (€65.5m) Biomass
Poland has raised from selling its surplus greenhouse gas According to the Polish Energy Policy,
Policy biomass combustion is
emission credits under the Kyoto Protocol. going to satisfy almost 30% of the demand for renewable
Apart from the European Funds, Poland observes a lot of sources in 2030. The entire biomass combustion market value is
foreign investors’ activity. This is connected with the necessity assumed to exceed PLN2b (€481.4m) within the next few years.
to submit a grid connection application fee for the projects that Therefore, the Polish Power Exchange plans on starting the
have not been granted a grid connection yet. biomass fuel spot and forward trading.

Grid GdF Suez is launching its biomass project in Polaniec thermal


power plant. The new 190MW biomass-powered unit will be
Grid operators are planning to spend about PLN4.3b (€1b) constructed and put into operation in 2012. Total capex is
within the next five years on grid investments. The investment PLN1b (€240.7m) and it will be the biggest European unit fired
plans include installation of 4000km of power lines and with biomass.
construction of 163 power stations.
Dalkia has selected Poland as the site for the group's largest
The exact sums remain unknown; however, the planned biomass project. Two biomass generators, worth €70m, are to
investment by the end of 2015 in the entire energy sector be constructed by 2012.The investment of €70m, which is to
should exceed PLN100b (€24b). PSE Operator S.A. alone is generate around €36.4m in supplementary annual turnover, is a
going to invest in 2,200km of the new transmission lines, project which will exceed the target of 15% renewables fixed by
modernize another 1,500km and construct 11 new substations. Poland's energy policy and will prevent the release of 460,000
There are also plans to spend PLN857m (€206.2m) on new tonnes of CO2 emissions per year.
connections up to 2015, of which PLN318m (€76.5m) will be
spent on RES connections only.

Planning Contact:
In accordance with the Spatial Planning and Development Act, Kamil Baj
use of property and building development of a given property is Tel: +48 23 557 8855
determined by the local spatial development plan. A zoning Email: kamil.baj@pl.ey.com
permit is required for properties not included in the plan Jacek Rodzeń
mentioned and it should be issued within two months. However, Tel: +48 23 557 6234
in practice it may take up to four to six months. Email: jacek.rodzen@pl.ey.com

Renewable energy country attractiveness indices Issue 26 25


Country focus – Belgium
Green certificate Furthermore, the grid manager is obliged to fund the grid
connection cable up to €25m (over a five-year period) for a
Ranking Issue 26 Issue 25
project equal to or exceeding 216MW (if less than 216MW,
All renewables index 161 161
funding commitment decreases proportionally).
Long-term wind index 131 14
Near-term wind index 151 151 Energy efficiency
Source: Ernst & Young analysis
One of the priority goals of the Flemish Government consists of
1. Joint
the establishment of a Flemish Energy Company (budget €200m).
Green certificate system This will be an energy services company focusing on a greener
In Belgium, electricity generated through renewable energy Belgian energy market by investing in energy saving and energy
sources is promoted by the Government through an incentive efficiency in, e.g., public buildings and social housing and the
scheme of green current certificates (GCC) on top of the production of renewable energy.
electricity prices. New energy sources are governed on a regional
Corporate news
basis (except for nuclear energy and offshore), hence the
characteristics of this incentive scheme vary from region to Four companies active in the RE business are as follows:
region (Brussels, Flanders and Wallonia) and type of technology.
Enfinity, founded in 2005, is a fully integrated project developer
Other incentive scheme aspects consist of investment credit and
of renewable energy projects in solar and wind technologies.
tax incentives depending on specific conditions.
Enfinity is currently active in Belgium, Spain, Italy, Greece,
This regional system, together with high purchase obligation Germany, France, China, the Czech Republic, Bulgaria, India, the
levels, produces a relatively high return on investment for solar US and Canada, and continuously seeks to expand its
PV panels. GCCs are currently secured for a period of 20 years international footprint. (2009 sales €252m/EBITDA €46m)
and the amount of a GCC is determined upon the year of
CP
C-Power, B l i ’ pioneer
Belgium’s i iin offshore
ff h wind
i d iinstallations
t ll ti –
functionality of the installation.
finalized its first phase of installing six wind turbines (total
Photovoltaic market capacity of 30MW) in June 2009. The remaining 48 wind turbines
are due for completion in 2013.
The Belgian market depicted a strong growth in PV installations in
2009 (292MWp) compared with 2008 (49MWp), placing Belgium Belwind will complete its first phase (165MW capacity) by early
sixth in the global ranking. This boost is mainly driven by the 2011 which consists of 55 Vestas V90 turbines (42 turbines
favorable incentive scheme in place in Flanders for PV were up as at July 2010). In July 2009, the EIB provided €300m
installations installed in 2009, entitled to a GCC of €450 for each project finance, i.e., about 50% of the total investment (€614m).
MWh produced, secured for a period of 20 years. The GCC It was the first time that EIB took project finance risk in an
decreased to €350/MWh in 2010 and continues to decrease offshore wind farm. Project Finance International awarded
gradually in the coming years. Belwind with a prize in the category “Power deal of the year” for
its unexpected combination of investors.
Offshore wind
Electrawinds develops, builds and produces green energy via
Aiming to stimulate the production of offshore wind energy, the wind turbines, biomass power plants, and solar farms. This
federal regulation body (CREG) grants a GCC for each MWh net company participates in three of the six domain concessions for
produced energy by accredited offshore energy installations. offshore wind development in Belgium. Operational projects are
Currently, six domain concessions for offshore wind development located in Belgium, France, and Italy and its operations are in the
have been granted, i.e., C-Power (2003, 300MW), Eldepasco process of expanding to Eastern Europe. It is also active in South
(2006, 216MW), Belwind (2007, 330MW), Rentel (2009, Africa and Namibia. (2009 sales €7m/EBITDA €2.2m)
288MW), Norther (2009, 420MW) and Seastar (2010, 246MW).
The tender procedure for the seventh and last domain concession
(area G) was suspended. Contact:
The minimum guaranteed price for a GCC amounts to €107/MWh Marc Guns
Tel: +32 (0)2 774 9419
for the first 216MW installed of a domain concession, and
Email: marc.guns@be.ey.com
€90/MWh for the capacity exceeding 216MW.
Matthias Page
Tel: +32 (0)2 774 6146
Email: matthias.page@be.ey.com

Renewable energy country attractiveness indices Issue 26 26


Country focus – Brazil
Energy auction, hydro and biomass issues Solar
Ranking Issue 26 Issue 25 Power company MPX Energia will build the BRL12m (€5.5m)
All renewables index 161 161 array in Ceara state, northeast Brazil. It is going to be the first
Long-term wind index 191 201 commercial-scale solar PV plant in the country. The company
Near-term wind index 18 181 will develop the first 1MW stage of the plant, which is likely to
Source: Ernst & Young analysis be expanded. The plant, which is being installed in a partnership
1. Joint with Chinese PV equipment maker Yingli, is set come on line by
In May this year, the Brazilian Government published its Draft year’s end.
Decennial Plan for Energy Expansion, dubbed PDE 2019, where
Hydro
it boosts the role of renewable energy sources in the country. It
envisages a 13% annual expansion rate for wind, biomass and Brazil’s Association of Small and Mid-Sized Electricity
small hydroelectricity. Estimated investments in Brazilian power Producers, said small hydroelectricity development in Brazil is
generation to 2019 are as below: currently going through its “worst moment” because the
Authorized plants Indicative plants Total
technology is lagging behind other renewable energy sources.
BRL (€) b % BRL (€) b % BRL (€) b %
Among the more than 14GW of renewable energy capacity
Hydro 22.3 (10.2) 33 77 (35) 71 99.3 (45.4) 57
Thermal 28 (12.8) 42 0 0 28 (13) 16
entered for participation in the August auction, only 18 small
8 (4) 12 0 0 8 (4) 5 hydropower plants totalling 255MW of installed capacity have
Nuclear 3 (1) 5 0 0 3 (1) 2 signed up to participate.
Natural gas
Coal 5.2 (2.4) 8 0 0 5.2 (2.4) 3 The lack of recent technological evolution is one of the reasons
Fuel/diesel oil 11.7 (5.3) 17 0 0 11.7 (5.3) 7 attributed for the loss of hydro competitive powers, which
Small hydro/ 16.9 (7) 25 30.7 (14) 29 47.6 (21.8) 27
makes break-even prices for these producers higher than other
biomass/wind
Total 67.2(30.7) 100 107.7(49.2) 100 174.9(80.0) 100 technologies. Additionally, paperwork requirements for small
Source: PDE 2019
hydropower are greater and environmental licensing takes
longer than for wind or biomass. Nevertheless, some of this lag
As a follow-up for this plan, two renewable energy auctions are could be tightened if hydro would come to receive the same tax
expected to be held in August. The first one, which will seek incentives as wind energy, for example.
offers of reserve energy is now scheduled for 25 and 26
August, while the second auction for alternative energy will be Biomass
26 August. Auctions will limit sales to energy generated by Biomass electricity generation continued to expand forcefully in
wind, biomass and small hydroelectricity plants. The national Brazil in 2009, even though the country experienced a 3.4%
energy research company has registered 517 companies for drop in national energy demand. Brazil’s biomass success during
participation with a combined capacity of 15.774GW. a difficult year for the economy resulted from the growing use
Policy of sugar cane bagasse for electricity generation. Though
production last year increased just 1.2% to 146m tonnes,
A Brazil House of Representatives commission has voted in bagasse use for electricity generation soared 30% from 9.7m
favour of a bill that would see Brazil source 10% of its electricity tonnes in 2008 to 12.6m tonnes.
needs from renewables in 2018. This would bring the current
target four years forward. The bill still needs to be reviewed and Despite that, more than half of Brazil’s sugar and alcohol
passed by the Committee of Mines and Energy, the Committee refineries that sold power in the 2008 reserve energy auction
for Constitution, Justice and Citizenship before facing a plenary are running late with the start of their deliveries scheduled for
vote. 2010. Mostly, generators are not to blame, as some of them are
waiting for the completion of transmission and distribution lines,
which are being built specifically to receive energy from sugar
cane bagasse cogeneration plants.

Contact:
Luiz Claudio S. Campos
Tel: +55 21 2109 1710
Email: luiz-claudio.campos@br.ey.com

Renewable energy country attractiveness indices Issue 26 27


Commentary — guidance
e notes
Long-term index Other renewable energy resources include small hydro, landfill
gas, and wave and tidal technologies. Energy from waste is not
As stated on page 1, the individual technology indices, which considered. Each of the indices consider, on a weighted basis,
combine to generate the all renewables index, are made up as the following:
follows:
1. Power offtake attractiveness (19%) — this includes the price
► Renewables infrastructure index – 35% received, the potential price variation and length of PPAs
► Technology factors – 65% granted. Higher scores are also achievable if a government
guarantees the power offtake rather than merchant
These guidance notes provide further details on the renewables
offtakers.
infrastructure index and the technology factors.
2. Tax climate (11%) — favorable, high-scoring tax climates that
Renewables infrastructure index stimulate renewable energy generation can exist in a variety
The renewables infrastructure index is an assessment by of forms and structures. The most successful incentives and
country of the general regulatory infrastructure for renewable structures have been direct renewable energy tax breaks or
energy. On a weighted basis, the index considers: brown energy penalties, accelerated tax depreciation on
renewable energy assets and tax-efficient equity investment
► Electricity market regulatory risk (29%) — markets that are vehicles for individuals.
fully deregulated score higher, as they have experienced the
“market shock” on underlying wholesale prices that this 3. Grant/soft loan availability (9%) — grants can be available at
transition may exert. While this may not affect current local, regional, national and international levels, and may
projects, these effects are particularly important when depend on the maturity of a technology as well as the
considering long-term investment prospects. geographical location of the generating capacity. Soft loans
have historically been used in pioneering countries of
► Planning
Pl i and d grid
id connection
ti iissues (42%) — favorable
f bl renewable energy technologies to kick-start the industry.
planning environments (low failure rates and strong High scores are achieved through an array of grants and soft
adherence to national targets) score highly. Grid connection loans.
scoring is based on the ease of obtaining a grid connection in
a cost-effective manner. The score also takes account of the 4. Market growth potential (18.5%) — this considers current
degree of grid saturation for intermittent technologies. capacity compared with published targets. Higher scores are
given if ambitious targets have been set and policy
► Access to finance (29%) — a market with a mature renewable framework is in place to accelerate development. The
energy financing environment, characterized by cheap realism of targets is taken into account as well as the
access to equity and good lending terms, will score higher. seriousness with which they are being pursued (e.g.,
This generic renewables infrastructure index is combined with penalties in place for non-compliance).
each set of technology factors to provide the individual 5. Current installed base (8%) — high installed bases
technology indices. demonstrate that the country has an established
infrastructure and supply chain in place, which will facilitate
Technology factors
continued growth and, in particular, encourage the
These comprise six indices providing resource-specific repowering of older projects.
assessments for each country, namely:
6. Resource quality (19%) — for example, wind speeds and solar
1. Onshore wind index intensity.
2. Offshore wind index 7. Project size (15.5%) — large projects provide economies of
scale and a generally favorable planning environment, which
3. Solar PV index
facilitates project development financing.
4. Solar CSP index

5. Geothermal index

6. Biomass and other resources index

Renewable energy country attractiveness indices Issue 26 28


Commentary — guidance
e notes
Near-term wind index In the offshore near-term wind index, countries with no projects
estimated to reach construction in the next two years are
As stated on page 1, the near-term wind index focuses on excluded.
factors of most immediate concern to near-term investment in
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
forecasts used are a market view only and the scores in no way
► Power offtake attractiveness – 27% guarantee that the forecasted capacity will be built.
► Tax climate – 8% While comparisons have been made between scores in the long-
► Resource quality – 14% term and near-term wind indices, it should be emphasized that,
due to the different weightings and parameters used, these
► Market growth potential (next two years) – 40%
cross-comparisons are of a narrative nature only and by no
► Project size – 11% means indicate any quantitative valuation.

Renewable energy country attractiveness indices Issue 26 29


Company index
Company Page Company Page

2-B Energy 24 EDP Renovaveis 14

3E 8 Electrawinds 26
Electricity Supply Board, Electricity Supply Board
A2SEA 8 International 22

ABB 8 Eneco 24

Abengoa Solar 14, 20 Enel 9, 23

Acciona 20, 23 Energia 22

ACS 20 Enfinity 26

AES Corp. 8 Epcor Utilities 21

AES Solar Energy 17 ERG Renew 8

Akfen Holding 9 Etrion 17

Aquamarine Power 18 European Investment Bank (EIB) 2, 17, 25, 26

Asian Development Bank (ADB) 13 Evergreen Power Ltd 21

Asola 21 Exergy Development Group 8

Babcock and Brown 23 FE Clean Energy 8

Ballast Nedam 24 First Reserve 14

BARD Group 8 15
8, 15, 24 Fotowatio 20

Belwind 26 Gamesa 20, 23

Bhilwara Energy Limited 8 GdF Suez 25

Bord Gáis Éireann 22 General Electric (GE) 8,14

C-Power 26 Groupe RSW Inc 21

Cape Wind 14 GT Energy 22

Capital Power 21 Hindustan Petroleum 16

China Huaneng Group 8 Hydro-Quebec 21

China Longyuan Power Group Corp. 13 Iberdrola 20, 23

China Shipbuilding Industry Corp 8 IHC Merwede 24

Clenergen Corporation 9 International Finance Corporation (IFC) 7, 8

Clenergen India 9 Intesa Sanpaolo Group 17

Conergy 23 IVPC Power 5 8

Co-operative Bank 18 Karnataka Power Corp (KPC) 16

Dalkia 25 Lee Strand Co-operative 22

Dong Energy 8, 12, 18 MPX Energia 27

Dongfang Electric Corp 8 NewPage Port Hawkesbury Corp 21

E.ON 2 Nissan 22

EDF, EDF-EEN 23 Nordkraft 8

EDF Energies Nouvelles 11, 17 Nova Scotia Power Inc 21

Renewable energy country attractiveness indices Issue 26 30


Company index
Company Page Company Page

Ocean Energy Systems (OES) 22 WPD 23

Ontario Power Authority (OPA) 21 WRE 23

OPEL International 7 XEMC Darwin 24

Orient Green Power Company Ltd 9 Yingli 27

PSE Operator S.A. 25 Zhejiang Machinery and Electrical Group 8

Renault 22

Renova Energia 9

Renovalia 9, 20

RSW RER Ltee 21

RWE Offshore Wind 24

Salten Kraftsamband 8

Shanghai Electric Group 8

Siemens Energy 8

Sinovel Wind Group 8

Solar Millennium 14

Solaria 20

SolarWorld AG 7

Southern California Edison 14

SSE, SSE Renewables 15

SuedWestStrom (SWS) 8, 15, 22

Suncor Energy 21

SunEdison 14, 21

Suzlon Energy Ltd. 16

TenneT 24

Tra Investments 22

TransAlta 21

Troms Kraft Group 8

T-Solar 20

Van Oord 24

Vattenfall 12, 15, 18

Ventyx 8

Veolia 23

Vestas Wind Systems 14, 21, 26

Vista Equity Partners 8

Renewable energy country attractiveness indices Issue 26 31


Glossary
Abbreviation Definition Abbreviation Definition

ARRA American Recovery and Reinvestment Act MW/MWh Megawatt/Megawatt hour


b Billion NASDAQ National Association of Securities Dealers
Automated Quotation System
BSH Bundesamt für Seeschifffahrt und Hydrographie
NEA National Energy Administration
CAI Country attractiveness index
NEB National Energy Bureau
CHP Combined heat and power
NREAP National Renewable Energy Action Plan
CO2 Carbon dioxide
NSM National Solar Mission
CPI Consumer Price Index
OEM Original equipment manufacturer
CSP Concentrated solar power
PDE Decennial Plan for Energy Expansion
dB Decibel
PPA Power purchase agreement
DECC Department of Energy and Climate Change
PTC Production Tax Credit
DOE Department of Energy
PV Photovoltaic
EBITDA on
Earnings before interest, taxes, depreciation and amortizatio
RE Renewable Energy
EBRD The European Bank for Reconstruction and Development
REC Renewable Energy Certificate
EPIA European PhotoVoltaic Industry Association
RES Renewable Energy Standard
EWEA European Wind Energy Association
RESOP Renewable Energy Standard Offer Program
FIDEME A French renewable energy investment fund
RO Renewables Obligation
FiT Feed-in tariff
ROC Renewables Obligation Certificate
FLOW Far and Large Offshore Wind
ROI R t
Return on iinvestment
t t
GBI Generation-based incentives
RPS Renewable portfolio standard
GCC Green current certificates
S&P Standard & Poor’s
GDP Gross domestic product
SDE Stimulering Duurzame Energie
GHG Greenhouse gas
SDL Systemdienstleistung
GSE Gestore Servizi Energetici
SEAI Sustainable Energy Authority of Ireland
GW Gigawatt
SEI Sustainable Energy Ireland
GWEC Global Wind Energy Council
SEZ Special Economic Zone
HCPV High concentration photovoltaic
SME Small and medium enterprises
IEO Polish Institute for Renewable Energy
t Trillion
IPC Infrastructure Planning Commission
tpa Tonnes per annum
IPO Initial public offering
TPA Technology Partnership Agreement
IPP Independent power producers
TSO Transmission system operator
IRR Internal rate of return
TWh Terawatt hour
ITC Investment Tax Credit
VC Venture capital
JI/CDM Joint implementation/clean development mechanism
VVD Dutch People's for Freedom and Democracy Party
JNNSM Jawaharlal Nehru National Solar Mission
W Watt
KW/KWh Kilowatt/Kilowatt hour
ZDE Zones de developpement de l'eolien
kWp Kilowatt-peak
LEC Levy exemption certificate
m Million
m/s Meters per second
M&A Mergers and acquisitions
MCE Ministerial Council on Energy
MRET Mandatory Renewable Energy Target

Renewable energy country attractiveness indices Issue 26 32


Ernst & Young

Assurance⎟ Tax⎟ Transactions⎟ Advisory

Ernst & Young About Ernst & Young


Renewable Energy Group
p Ernst & Young is a global leader in
assurance, tax, transaction and advisory
services. Worldwide, our 144,000 people
With a dedicated 65-strong team of international advisors operatin
ng from our UK are united by our shared values and an
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make a difference by helping our people,
firms worldwide, Ernst & Young’s Renewable Energy Group helps clients
c to increase
our clients and our wider communities
value from renewable energy activity. Members of the Group proviide advice and achieve their potential.
services in the following areas:
Ernst & Young refers to the global
► Buy-side and sell-side M&A Technologies we cover: organization of member firms of
Ernst & Young Global Limited, each of
► Capital raising and project finance ► Onshore and offshore
o wind which is a separate legal entity.
► Financial structuring Ernst & Young Global Limited, a UK
► Biomass
company limited by guarantee, does not
► Valuation and business modeling ► Biofuels provide services to clients.

► Transaction support For more information about our


► Energy from waste
w
organization, please visit www.ey.com
► Commercial due diligence ► Wave and tida
al
© 2010 EYGM Limited.
► Joint venturing and partnerships All Rights Reserved.
► Solar
► Refinancing ► Fuel cells EYG No. DE0161

► IPO advice ► CHP This publication contains information in summary


form and is therefore intended for general guidance
► Low carbon transformation services ► Landfill gas 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
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this publication. On any specific matter, reference
► Regulatory and policy reform should be made to the appropriate advisor.

► Strategy review www.ey.com

Contact
For further information on our services and for future copies of the indices,
please visit our website www.ey.com/renewables or contact:
Ben Warren
Partner, Ernst & Young LLP
bwarren@uk.ey.com
Andrew Perkins
Partner, Ernst & Young LLP
aperkins@uk.ey.com
Dane Wilkins
Director
dwilkins1@uk.ey.com
Arnaud Bouille
Director
abouille@uk.ey.com

Country attractiveness indices production supported by:


Phil Dominy, Senior Executive
pdominy@uk.ey.com
Klair Brownlee, Executive
kbrownlee@uk.ey.com
Tad Fon Kho, Executive
tkho@uk.ey.com