Global investment in renewable energy could reach $750bn annually within the next 10 years, according to the latest Ernst & Young Renewable Energy Country Attractiveness Index – which tracks and scores investment in renewable energy.
Demand for renewable energy is growing at unprecedented rates, driven by competing government incentives. In 2006 investment reached $100bn and Jonathan Johns, Head of Renewable Energy at Ernst & Young, says he sees no signs of these levels cooling off despite the uncertainties in some global markets.
Johns says, "Competition for assets is intense and trade players are increasingly battling for supply chain presence. Further takeover speculation has fuelled share price rises this year and while global trading markets have been tumbling, energy stocks appear to have escaped relatively unscathed for the time being."
He adds, "Given the industries current growth rates of 20% to 30%, the drive from manufacturers' for greater profitability, and new entrants coming into the market from the tiger economies, possibly even Japan, M&A activity is likely to filter down the supply chain adding a premium for key assets such as gearbox and bearing manufacturers."
The All Renewables Index, which scores investment for all forms of renewable energy, from solar to wind and biomass, shows that the US continues to be the global leader – a position it has comfortably held since last autumn.
Over the quarter the Index remained fairly static. The biggest change was the three point rise up the table for the UK from fifth to second position (which it shares with India and Spain) as investors received a fillip from the energy white paper, which put renewables firmly at the centre of future energy policy.
Overall Johns says that the outlook for the sector is very positive, although critical mass is becoming imperative for those companies that are serious about being real players in the market. "The ability to acquire and commercialize new technologies, enter new markets and diversify across the industry requires a strong balance sheet, a track record of raising finance for new acquisitions and a dynamic approach – it's not for the faint hearted."
The Ernst & Young Country Attractiveness Indices provide scores for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies. The indices provide scores out of 100 and are updated on a regular basis.
The main indices are referred to as the 'Long-Term Index'. The Near-Term Index takes a two-year view with slightly different parameters and weightings. The Country Attractiveness Indices take a generic view and different sponsor/financier requirements will clearly effect how countries are rated. Twenty-five countries are monitored in the indices.
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