The latest EY Renewable Energy Country Attractiveness Index (RECAI) shows that China and the United States remain at the top of the ladder for their renewable investment and deployment opportunities. The UK is placed at number eight, reflecting no change since the previous analysis conducted in November 2018. Meanwhile, France rose to third place (from fifth). The EC has approved four floating offshore wind demonstration projects in France. In addition, six-monthly onshore wind tenders are doubling in size.
EY points to a new landscape in which investors must increasingly adapt to provide renewables without subsidy. This means that, amongst other factors, projects must be resilient enough to deal with movements in the wholesale power price. Overall, where renewables can survive without subsidy, they will be more robust and cost reductions will be encouraged. However, a lack of support is likely to affect growth rates and could also disadvantage technologies that are not yet mainstream.
In the UK, the Contract for Difference (CfD) auction scheme takes out exposure to the volatility of the wholesale power market by paying the generator the difference between an agreed strike price and the wholesale price. However, CfD opportunities are limited when compared to subsidy schemes such as the Renewables Obligation that is now closed to new entrants.
In the UK’s Offshore Wind Sector Deal, announced earlier this year, the government committed to supply 30% of its electricity from offshore wind by 2030. The government plans to invest further in the CfD to support this development, enabling projects to reduce costs until offshore wind eventually becomes subsidy-free.
The UK has successfully encouraged a move away from coal through carbon taxation. As a result, coal accounted for less than 6% of the energy mix in Q4 2018. In the same quarter, 38% of power generation was met by gas and 37% by renewables.
In China, the government has so far provided financial support for renewables, but this is being slowly reduced to encourage subsidy-free development. By the end of 2018, China had 172 GW of solar capacity in place, accounting for 35% of global solar capacity. Its wind capacity stood at 181 GW. As subsidies reduce, the focus is expected to be in wind rather than solar.