Top ten most attractive markets for renewable energy investment

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Research company IHS Markit has released a new report highlighting the world’s most attractive markets for renewable energy investments.

The report, Global Renewables Markets Attractiveness Rankings, tracks countries’ attractiveness for investment for offshore wind, onshore wind and solar PV and does not focus on hydro.

The ranking is based on seven subcategories including the current policy framework, market fundamentals, investor friendliness, infrastructure readiness, revenue risks and return expectations, easiness to compete and the overall opportunity size for each market.

Indra Mukherjee, senior analyst, global clean energy technology and renewables, IHS Markit, said: “The ongoing transition to competitive procurement and a growing need for grid-parity renewable power has forced investors to look beyond just financial incentives and focus on factors including economic stability, market liberalization and investor friendliness.”

The top ten most attractive markets for renewable energy investment for the period ending December 2020 include:

1. The United States

The US has been placed at number one owing to the pledges made by the Biden Administration to increase focus on renewable energy development by reversing the damages made by regulations adopted by the Trump government that favoured conventional energy generation.

The Biden Administration pledged to significantly increase federal investment in renewable energy under the American Jobs Plan. After the Trump Administration pulled out of the Paris Climate Change Agreement, the first move made by the Biden government when enacted was to rejoin the partition, a development that is expected to increase funding towards clean energy resources as the country decarbonises.

According to IHS Markit, the US claimed the top spot on account of sound market fundamentals and the availability of an attractive—though phasing down—support scheme.

The US also retained the top ranking in investment attractiveness for onshore wind and solar PV.

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2. Germany

Europe’s biggest economy and the world’s fourth-largest has been placed at number two as the country intensifies its deployment of renewables.

In 2020, renewable energy including hydro and biogas accounted to 46% of Germany’s total energy consumption, nearly equaling that of coal, gas, oil, and nuclear power combined. Germany is fast-forwarding the closure of its coal-fired power plants as well as nuclear and ramping up its investments in renewables. The country’s policies on climate change mitigation are a key driver following the Germany’top court ruling that binding to the EU target of reducing emissions by 55% by 2030 is not enough for the country to address challenges resulting from climate change.

3. Mainland China

Although China is claimed to be the world’s largest market for renewable energy in terms of capacity deployment, IHS Markit has ranked the world’s second biggest economy as number three as difficulties in accessing the market weighed down its overall score.

Eduard Sala de Vedruna, executive director, global clean energy technology and renewables, IHS Markit, said: “While the lion’s share of 2020 capacity additions came from just two markets—China and the United States—close to 50 markets recorded double digit growth in the past year.

4. France

France and Spain have been positioned at number four and number five, respectively owing to strong market fundamentals backed by stable procurement mechanisms and long-term clean energy targets. These have attracted large international investors to invest in the country’s renewables industry.

This May, European Investment Bank (EIB) partnered with public sector financial institution Caisse des Dépôts to establish a new €1 billion ($1.2 billion) investment vehicle aimed at accelerating the energy transition in France.

France has also announced a €100 billion ($120.8 billion) green recovery plan to be made through ‘France Relance’. Up to 50% of the budget will be directed towards ecological transition with “the objective of reducing by 2030 gas emissions by 55% compared to the 1990 levels.

5. Spain

In 2020, Teresa Ribera, Spain’s vice president and Minister of Ecology announced the country’s new proposed net-zero carbon plan which included cutting the country’s carbon emissions to net-zero by 2050 and banning all new coal, oil and gas extraction projects with immediate effect. This meant the country’s readiness to expand its renewables market.

Large international investors such as the European Investment Bank, the European Bank for Reconstruction and Development and Official Credit Institute have in 2020 released significant investments to scale up the Spanish renewables market.

6. India

India has been ranked at number six owing to strong ambitions and stable procurement initiatives. The Government of India has set a target of installing of installing 175GW of renewable energy capacity by the year 2022, which includes 100GW from solar, 60GW from wind, 10GW from bio-power and 5GW from small hydro-power.

However, India’s onshore wind build has suffered from lack of grid and land access, a factor that is likely to hinder adoption.

7. Australia

Australia has been placed at number seven owing to a high degree of investor friendliness. However, the disconnection between federal and state ambitions have increased investor uncertainty.

“While strong ambitions are perceived positively by investors and testify to a market’s commitment towards renewables, this needs to be backed by a well-conceived implementation framework, adequate infrastructure and durable policies,” added Mukherjee.

8. Japan

Strong ambitions and stable procurement mechanisms in addition to investor friendliness are the key factors that have resulted in the placement of Japan and the Netherlands on number eight and nine, respectively.

Over $100 billion of investment in wind and solar power plants are expected to push Japan’s renewables share to 27% of the generation mix by 2030, exceeding the country’s target, according to research firm Wood Mackenzie.

9. The Netherlands

In addition, their strong impetus towards offshore wind (the fastest growing renewable energy technology in the next decade) is also expected to drive the increase in investments in Japan and the Netherlands.

The Dutch government has adopted a number of policies that are likely to encourage investments in renewable energy projects. These mandates include closing down all remaining five coal-fired plants no later than 2030 to achieve a 49% reduction of carbon emissions.

The Netherlands supports the increase of the European 2030 renewable energy target to 32%. However, the Netherlands applies a bandwidth of 27 to 35% for the national target for renewable energy.

10. Brazil

Following the country hitting the 7GW of operational PV milestone in 2020, the government has set a target to produce 45% of its energy by 2050, a development which is expected to drive investments within the renewables segment over the coming years.

“Onshore wind, offshore wind and solar PV are set to account for over 80% of all new power generation capacity additions globally to 2030,” added Eduard Sala de Vedruna.

Read more information about the report.