renewable energy country attractiveness indices

In this issue:Overview of indices: issue 21 ................................2

Country attractiveness indices survey ........................3

Managing renewables through the recession ............4

Issue highlights ......................6

All renewables index at May 2009 .......................10

Long-term wind index at May 2009 .......................11

Country focus – US, Germany, China, Spain, India, Italy, UK, Poland .........12

Near-term wind index at May 2009 .......................19

Offshore wind, marine and tidal focus .....................20

Feature – solar indices at May 2009 .......................21

Commentary — guidance notes ....................23

Glossary ..............................27

Company index ....................26

Renewable energy country attractiveness indices

May 2009Issue 21

Global highlights The US remains top in the All renewables index and stretches its lead to four points.

The European nations have benefited from the European Economic Recovery Plan as well as announcements from the EC that one-third of Cohesion Policy funds will target a ‘green economy.’ These announcements have driven a rise in infrastructure scores across the affected Member States.

The Indian government has announced a new target of 10% renewable energy within its energy mix by 2012. This, along with rises in tariffs for wind and solar, both photo voltaic and concentrated solar power, have bolstered India’s position near the top of the table.

The UK budget has boosted the near-term position of the UK due to the positive impact it will have on offshore wind in the near term. However, the rises in banding will only be in place to varying degrees for projects which place new orders for turbines in 2009-10 and 2010-11. This could lead to many projects pushing for faster development to ensure orders are placed within these windows but may have limited impact on projects which are further from completion and which may struggle for financial viability at the 1.5 ROCs/MWh rate (post 2011-12).

Following this, the UK has fallen below Italy in the All renewables index. Italy’s score was enhanced following receipt of significant European funding, however recent media allegations of corruption may undermine this market’s score in the future.

This issue sees a revision to the Solar index, to reflect the increasing role of CSP generation. Changes to weightings in the index have seen overall rises in solar score for countries such as the US, Spain and India which have strong CSP potential, while some countries such as Germany and France have seen drops in overall score reflecting their weaker potential for CSP generation.

In the near-term index, revised forecasts have seen the US rise as the reduction in forecast capacity for 2009-10 was not as great as expected. However, it is still well below its peak in Q4 of 2007.

We would like to thank all those who took the time to respond to the recent country attractiveness indices survey. Please see page 3 for initial results.

2 Renewable energy country attractiveness indices Issue 21

Overview of indices: issue 21The 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 (all renewables and long-term wind) are referred to as the long-term indices. The near-term wind index takes a two-year view with slightly different parameters and weightings (see right).

The country attractiveness indices take a generic view, and different sponsor/financier requirements will clearly affect how countries are rated. Ernst & Young’s Renewable Energy Group can provide detailed studies to meet specific corporate objectives. It is important that readers refer to the guidance notes set out on pages 23 to 24 when referring to the indices.

Long-term IndicesThe long-term indices are forward-looking and take a long-term view, hence the UK’s high ranking in the wind index, explained by the large amount of unexploited wind resource, strong offshore regime and attractive tariffs available under the Renewables Obligation mechanism. Conversely, although Denmark has the highest proportion of installed wind capacity to population level, it scores relatively low because of its restricted grid capacity and reduced tariff incentives.

All renewables indexThis index provides an overall score for all renewable energy technologies. It combines individual technology indices as follows:

Wind index – 75% 1. (comprising onshore wind index and offshore wind index)

Solar index – 10% 2. (comprising solar PV index and solar CSP index)

Biomass and other resource index – 15%3.

Individual technology indicesThese indices are derived from scoring:

General country-specific parameters (the renewables •infrastructure index), accounting for 35%

Technology-specific parameters (the technology factors), •accounting for 65%

Renewables infrastructure indexThis provides an assessment by country of the general regulatory infrastructure for renewable energy (see page 10).

Technology factorsThese provide resource-specific assessments for each country (see page 10).

Long-term wind indexThis index is derived from scoring:

The onshore wind index – 74% •

The offshore wind index – 26% •

Near-term wind indexThe near-term wind index takes a forward-looking two-year view based on the parameters of most concern to a typical investor looking to make an investment in the near term. The index gives scores for onshore and offshore separately. For parameters and weightings see page 24.

“Ernst & Young was ranked the leading project finance advisor in the Americas, Europe, Middle East and Africa between 2001 and 2008 by Project Finance International”

Comments and suggestionsWe would welcome your comments or suggestions on any aspect of the indices. Detailed attractiveness surveys and market reports can be provided taking account of specific corporate objectives.

Please visit our website www.ey.com/renewables or contact either:

Ben Warren, Partner [email protected]

Andrew Perkins, Director [email protected]

Dane Wilkins, Account Director [email protected]

Arnaud Bouille, Director [email protected]

Enquiries to the Guest Columnist Jonathan Johns should be addressed to [email protected]

http://www.ey.com/renewables

mailto:[email protected]



3Renewable energy country attractiveness indices Issue 21

Country attractiveness indices surveyDuring April and May 2009 we asked our readership for your thoughts on the current content, the relevance to the market, your information requirements and how we can develop the content to meet your evolving needs for the future.

Initial results from the survey indicate the most popular sections in the country attractiveness indicies are the country focus pages and the all renewables index.

Favoured section

All renewables indexCountry focus pagesIssue articles

Market highlights: M&A activityOthers

Frequency of publicationFrequency of publication

Ad-Hoc: as significant

changes develop

Bi monthly Half yearly QuarterlyRe

spon

ses

We are analysing the feedback from our survey and will incorporate the results in future issues of the country attractiveness indices.

We would like to thank everyone who kindly completed the survey, and would welcome any further feedback you may wish to provide.


Notwithstanding renewables’ favorable long-term investment backdrop, supported by the twin drivers of climate change and the security of energy supply, the credit crunch and ensuing recession has had, and is likely to continue to have, a marked effect on the sector:

Borrowing terms have tightened considerably with a flight to •quality where funds are available. Cross-border lending has become more challenging.

Chronic capacity shortages and bottlenecks have been replaced •by overcapacity and job losses, particularly in the solar PV manufacturing sector and also in wind.

Oil majors have announced either withdrawal or retrenchment •from previous headline investments in the sector as they slash capital budgets in their core businesses.

Bloated P/E ratios have fallen considerably. •

The days of inexorable profitable growth are over. Some of •those purchasing projects at the height of the boom have suffered significant asset write-downs with some overgeared distressed purchasers selling assets at below cost.

It is welcome that the fiscal stimulus packages put in place •by the majority of OECD countries include a strong renewables component. Governments have recognised green jobs as a key area of growth as economies prepare themselves for a post-recession low-carbon era.

(US$m) Renewables GridEnergy

efficiency

Stimulus as a

% of 2007 GDP

US 32,780 11,920 41,000 0.62%

Germany 631 130 18,330 0.58%

China – 70,000 100,495 5.20%

India1 0.00%

Spain – 163 – 0.01%

Italy 1,369 143 2,757 0.20%

UK 1,001 72 815 0.07%

France 617 5,550 530 0.35%

Canada – 790 730 0.11%

Source: Ernst & Young 1. India has supported its green economy through the introduction of new tariffs showing a differing approach.

A comparison of investment in terms of GDP is salutary as in some cases the rhetoric is stronger than the investment, with China and the US powering ahead and other countries reeling in their wake (see the table above).

By late 2008/early 2009, many projects worldwide had been put on hold until the support packages were announced. US wind turbine projects are only now starting to recommence following the 30% treasury grant alternative to the PTC. UK offshore projects are only just receiving the go-ahead following an overhaul of the ROC regime, increasing income for projects squeezed by declining income and rising costs. Arguably, these welcome measures are only temporary palliatives. The US PTC/ITC structure has been demonstrated as overreliant on a narrow investment sector and, in the UK, the improved ROCs for offshore wind will largely be taken up by existing or soon-to-be announced projects with incentives declining to previous uneconomic levels in the relatively short term, leaving room for uncertainty. The need for more robust cost-effective mechanisms from a tax payer and consumer perspective is likely to emerge as a critical issue as cost savings rather than stimulus spending becomes a government imperative.

Even with the new packages in place, continued retrenchment is likely with further withdrawals and consolidation in the offing. In the solar PV sector in particular, capital calls are likely across all sectors, even by the strongest players as they seek to fund restructuring or capacity building for the next phase of growth. Capital and debt markets are likely to have only a limited appetite for such calls and the flight to quality is likely to continue, putting pressure on new innovative businesses. The stimulus measures should allow growth to recommence preferably on a more sustainable basis. Compared to many other sectors, such as construction, the renewables sector will look favorable.

For those with cash there are, and will be, considerable investment opportunities. It is worthwhile considering the environment that renewables face in the coming years as we enter the stimulus phase of the recession and prepare for recovery and a new era of growth. The timing of investment will be critical and will depend on a view of when the crossover point for the particular market is likely to occur. It is important to emphasise that each market is different as is each sector due to the multiplicity of mechanisms in place and the different stages of technology maturity.

Managing renewables through the recessionJonathan Johns, Guest Columnist

“The need for more robust cost-effective mechanisms from a tax payer and consumer perspective is likely to emerge as a critical issue.”


Economic growth and its affect on energy consumption is a key driver of carbon emissions. It is ironic that the recession is likely to prove the most effective device to date in cutting emissions, and the impact has been a rapid reduction in the price of carbon, demonstrating the volatile nature of that marketplace and confirming the need for capacity-building renewable incentives as well as cap-and-trade polluter-pays mechanisms. The extent to which carbon becomes fully priced in the economy is likely to have a fundamental effect on the speed of growth of the renewables sector and its profitability. This can be achieved either by way of trading (the preferred route to date) or by way of taxation, a route likely to be increasingly tempting to depleted government treasury departments.

The West is unlikely to be able to fund, given the high levels of borrowing, support mechanisms at current levels for indefinite periods of time. There will be considerable pressure to reduce them once the economy starts growing again, and it will be important that by this time the green jobs sector should have gained its own momentum to help justify the long-term economic case for renewable investment.

Investment in grid and energy efficiency have been recognised as every bit as important as investment in renewables: indeed, in the next few years, these markets are likely to be at least as significant as renewables if not more so, and from an investor perspective have increasing appeal as a new, but in some ways less risky, ‘kid on the block’. It also should not be forgotten that fossil fuels are likely to attract investment dollars as there is no clear pricing of carbon yet, and opportunities in the short term may improve as prices could again spike when growth recurs.

Value for money is likely to become increasingly critical for renewables as it becomes a mainstream solution, both in terms of straight economic cost and in terms of price per carbon

tonnes saved. Real declines in output costs per kWh and improved reliability will be demanded of all technologies. This is likely to lead to increased globalization of the technology supply chain with China having, in all probability, secured a competitive foothold, if not advantage, as its own deployment has continued largely uninterrupted. For the West, the race for new technologies is likely to become an increasing imperative but only if they provide cost or output advantages in the medium term. Blue-sky technologies will need to be transformational to command government support and equity resource as there will be many other short-horizon investment opportunities.

The credit crunch and the recession give the industry time to make some tough decisions and to emerge stronger. It is fortunate to have significant government support to allow it to accomplish this but should probably realise that post-2015 the state may be seeking to wean itself off the mechanisms currently in place in favor of more direct measures focused on making the polluter pay. This will provide economic advantage to the industry, providing it is by that time prepared for that new era. Those who seek to rely wholly on existing business models without adapting them may find their viability challenged.

“Value for money is likely to become increasingly critical

for renewables.”

Ernst & Young conceptual framework for navigating a renewables business through financial crisis

€/MWh

Phase F:Restored growth

Phase E:Recovery

Phase C:Stimulus

Phase B:Financial crisis, pre-stimulating

Phase A:Pre-financial crisis

20202019201820172016201520142013201220112010March2009

2008200720062005

Value gainor high profits

Aggregate revenue

Aggregate cost

“Cross-overPoint”

Time

Value impairmentor low margins

Value gainor higher margins

Length of recession?

A

B

Scenario:

Scenario A: Increased carbon price and technology costs fallingScenario B: Consumer resistance to higher prices and taxes resulting in greater tariff dependency and reducing

financial incentives. Lower carbon price.

Factors impacting timing of cross-over point:• Carbon price• Technology economics• Nature of support regulations• Length of recession• Length of Financial Crisis• Availability of credit

Phase D:Post-stimulus

Brown power price

Financial incentives

Carbon price

Revenue Drivers

Technology efficiencyCost of funds

Commodity priceCapacity levelsCost drivers

Revenue

Cost

$50€10

$60€10-15 €35 or €20€30 or €25€25€20€30

$90 $100$80$70$140Oil Price ($/barrel)Carbon Price (€/tonne)

Phase C - “Stimulus period” ends 31/12/2010• Debt markets static• US Capital Grants• German accelerated depreciation• UK offshore wind at 2 ROCs per MWh (until 31/03/11)• Investment opportunity due to low prices

Phase D – “Post-stimulus period” ends 31/12/2012• Debt markets free up• Pre EU - ETS phase 3• European Investment Bank projects• M&A increasing

Crossover

point


Equity markets

Stock and indices since March 2007Stock prices have shown a slower decline since the sharp drop seen during Q3 and Q4 2008:

Renewable energy and indices performance from December 2006 to March 2009

0.0

1.0

2.0

3.0

4.0

Dec-06 Sep-07 Jun-08 Mar-09

FTSE

NEX (WilderHill)

Wind (Ernst & Young)

Solar (Ernst & Young)

Biomass (Ernst & Young)

Utilities (Ernst & Young)

Crude oil

HSBC climate change index

Source: Ernst & Young

Volatility is still apparent due to uncertainty regarding the scale, scope and impact of financial recovery packages which have been steadily announced throughout the latest quarter. During March 2009, renewable stocks generally rallied slightly, together with the rest of the economy, however talk of ‘green shoots’ may be premature in the near-term.

End October

2008End January

2009End March

2009

NEX -47% -51% -52%

HSBC Climate Change Index -40% -38% -44%

Wind (Ernst & Young) -40% -29% -38%

Solar (Ernst & Young) +69% +60% +49%

Biomass (Ernst & Young) -62% -61% -69%

Utilities -14% -24% -36%

Brent crude oil +15% -30% -25%


Wind, Solar and Biomass stock indices are based on a selection of 35 public companies listed in a variety of countries. (A March 2007 baseline is used.)

Apart from the solar sector, renewables indices have shown a degradation in position relative to the March 2007 baseline. A gradual decline in the Utilities’ stock values has continued while oil prices appear to be stabilizing, showing a slight uplift on the January position.

Comparing share prices at the end of March 2009 with those at the end of October 2008 paints a slightly different picture: Solar prices have fallen 20%, while wind prices have actually risen by 2%. Meanwhile biomass prices have fallen by a further 7%. The disproportionate solar correction is thought to be due to over-valuations in early 2008 and late 2007. Additionally, the Spanish tariff cut last September and degression of the German tariffs at the beginning of this year have led to excess capacity in the solar sector. This, combined with a drop in silicon prices (leading to lower margins for manufacturers) has meant that some production capacity has had to close or combine to ride out the recession.

P/E ratio performance by RE sector P/E ratios have continued their steady fall from the unsustainable heights of late 2007, when average solar ratios were almost 160 and wind was around 110. In the Q3 2007 Country attractiveness indicies issue we warned that, “Price-earnings data of solar companies shows values of internet company levels, although many of these companies are at an early stage and hence their valuations may be exaggerated.” Indeed, ratios have subsequently dropped sharply for solar and wind companies, and now typical values range from about 27 for solar to 18 for wind and 11 for biomass.

P/E ratios

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Dec-07 Jul-08 Feb-09

Wind Solar Biomass


Issue highlights


Share price performance by RE sector In general, large solar companies appear to be performing significantly better than their smaller competitors, and the sector is holding up despite a drop in solar module prices across Europe. In the US, strong demand is maintaining module and share prices.

Solar share prices

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The biomass sector has continued its gradual fall in stock market pricing, that began back in early 2007. Both large and small companies alike have been impacted by the difficult market conditions that have persisted.

Biomass share prices

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Since the sharp price correction downwards last September/October, the wind sector has been fairly level over the last few months despite cuts to growth forecasts. Several prominent energy companies have scaled back their commitment to wind power, including FPL, Shell and Iberdrola; however, the larger, better capitalized, and more established OEM wind players are currently weathering the downturn better than smaller suppliers, although job losses have been common to both. Reduced turbine prices and increased financial incentives in a number of countries (especially the US) may lead to growth sooner than expected.

Wind share prices

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Recent flotationsThe performance of several companies which were floated late 2007/early 2008 looks to have turned a corner. After some large drops from initial valuations, firms such as Iberdrola Renovables, Xinjiang Goldwind, and EDP Renováveis have recovered since minima around late October 2008. This may offer signs of hope for those companies which delayed their IPOs during the financial crisis.

Issue highlights (cont’d)


Recent flotations

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Relative price

Iberdrola RenovablesXinjiang Goldwind

EDP Renováveis


M&A

UtilitiesItalian utility Enel is looking at a possible capital increase of €5 billion – €8 billion to curb its financial debt, including possibly putting its renewable energy assets up for sale. This is planned for June pending authorization and market conditions.

German utility EnBW and Turkish industrial company Borusan Holding intend to form a JV in order to build 2GW of power capacity in Turkey during the next 12 years, much of it renewable energy.

WindCLP Holdings Limited has acquired the Chinese wind farm portfolio of Roaring 40s Renewable Energy Pty Ltd., the Australia-based renewable energy producer, for a consideration of US$94.17 million. The acquisition is in line with CLP’s strategy to expand its operations and increase its renewable energy capacity by 122MW to over 1200MW. Post acquisition, in Australia, Roaring 40s will continue to operate as a 50:50 JV between CLP and Hydro Tasmania and develop wind projects. Hydro Tasmania is also planning to sell its share in Khandke Wind Farm, based in India, for an estimated US$11 million.

CLP has also won an auction to acquire a 32% stake in China Guangdong Nuclear Wind Power Co Ltd. from China Guangdong Nuclear Power Group (CGNPG) for a consideration of CNY 1.04 billion (US$152.36 million).

Bord Gais Eireann has acquired Sorne Wind Limited from HgCapital Renewable Power Partners Fund. Sorne Wind has generating capacity of 32MW.

RWE Renewables Polska has acquired a 30% stake in Park Wiatrowy Suwalki Sp zoo, a Warsaw-based owner and operator of wind farms, from Polish Energy Partners SA, for 6.5 million Polish zlotych (US$1.753 million). Concurrently, RWE also acquired a 30% stake in Park Wiatrowy Tychowo Sp zoo.

Mainstream Renewable Power has signed an 80:20 JV with Canadian wind farm developer Alberta Wind Energy Corporation (AWEC), to build an initial portfolio of over 400MW of wind energy plants with a combined potential investment value of US$850 million.

EDP Renováveis Brasil has acquired Windfarm Elebras Cidreira, a Cidreira-based owner and operator of wind farms, from Innovent GmbH, for 6.2 million reais (US$2.7 million). As a result of the transaction, EDP has secured 532MW of wind power.

DONG Energy has acquired the 51MW Karcino wind farm in Poland from Aktiv Wind, a company owned by bankrupt developer EuroTrust. The wind farm is expected to commence operations in 2010, and the overall construction budget totals around DKK600 million (US$100 million) including DONG Energy’s cash purchase price for the shares, provisionally calculated to be DKK38 million (US$7 million).

SolarFirst Solar, Inc has agreed to acquire a solar project development business from OptiSolar Inc., the US-based manufacturer of solar panels, for an approximate equity consideration of US$400 million. The acquisition includes a 550MW solar development project, which is already under a power purchase agreement with Pacific Gas and Electric company (PG&E) (see page 12); a project pipeline of additional 1,300MW; and certain related land rights of approximately 136,000 acres.

Nippon Oil Corporation has acquired a 31.2% stake in Space Energy Corporation, the Japan-based producer of solar cell silicon wafers, for a consideration of JPY3 billion (US$29.7 million) increasing its interest in the company to 46%.

National Semiconductor Corporation, the listed US-based developer of analog and mixed signal semiconductors has acquired Act Solar, the US-based provider of solar power optimization solutions and products, for an undisclosed consideration. The transaction is in line with National Semiconductor’s strategy of expanding its portfolio of power optimization technologies, by using Act Solar’s technology for monitoring solar arrays with its SolarMagic product line.

HgCapital Renewable Power Partners Fund has acquired a controlling stake in three Spanish solar PV plants, from AIG Financial Products Corp. The consideration represents an enterprise value of €300 million, with a total output of 35.4MW.



Mitsubishi Corporation has signed an agreement with Acciona S.A. to acquire a 34% equity interest in its subsidiary Amper Central Solar S.A, the developer and operator of the 45.8MW solar PV project in Amareleja, Portugal.

Nord/LB and Bremer have joined forces with three other investors to finance a €160 million solar facility in Brandenburg. The 53MW facility will be constructed by juwi Holding AG and First Solar.

White Owl Capital AG has bought a 1.7MW solar park in Spain located near the village of Castuera, from IBC Solar AG, a Bad Staffelstein-based owner and operator of solar plants.

Fotowatio Renewable Ventures, Inc. has agreed to acquire the renewable energy business of MMA Renewable Ventures LLC from its parent company Municipal Mortgage & Equity LLC for a consideration consisting of US$19.7 million.

Siemens has acquired a 28% stake in Italian solar company Archimede Solar Energy (ASE) for an undisclosed price. Siemens intends to provide capital for quickly expanding production capacities, with an option to acquire a majority in ASE in the mid-term.

Biomass and biogasDeutsche KWK GmbH agreed to acquire a 38% stake in Pro2 Anlagentechnik GmbH for €3.6 million (US$4.6 million).

RWE Innogy and the Westphalia-Lippe Agricultural Association have signed a cooperation agreement to construct and operate biogas plants which are run almost entirely on liquid manure. Present planning documents state the commencement of construction for the first pilot plant in Münsterland (district of Borken) is scheduled for September 2009, with commissioning envisaged in spring 2010. The plant is designed for 9MWth and could feed an annual 60GWh of biogas and 8GWh of electricity into the public gas grid.

GeothermalFor an undisclosed consideration, Max Weishaupt GmbH, the German heating and cooling equipment manufacturer, has acquired a majority stake in BauGrund Süd Gesellschaft für Geothermie mbH, the German company specializing in drilling and exploration of near-surface geothermal energy.

MarineSingapore-based Atlantis Resources, a developer of tidal turbines, has said that it raised US$14 million in funding. Norway’s Statkraft led the round, joining existing backers including Morgan Stanley, the largest shareholder of the company.

HydroStatkraft has agreed to acquire a 95% stake in Yesil Enerji AS, the Turkey-based energy company, from Global Yatirim Holding AS. Yesil Enerji holds controlling interests in seven hydropower projects, with a combined installed capacity of 633MW and an annual generation capacity of 2.1TWh.

RestructuringVestas have recently announced the closing of the Isle of Wight turbine plant with the loss of 450 jobs as part of a headcount reduction program which sees 1,900 jobs being cut.

The slowdown of the PV industry has seen job cuts in solar cell manufacturing across the globe as demand and hence price for cells drops. China, Spain and the US have borne the brunt of these impacts.

The Spanish PV industry has recently taken significant job losses with the Asociación de la Industria Fotovoltaica (ASIF) reporting between 10,000 and 15,000 redundancies.

BP has announced the closure of solar panel production sites in Maryland and Madrid.



The US leads the All renewables index at May 2009, where The American Recovery and Reinvestment Act (ARRA) has started to influence sectors of the market. In an example of this Western Area Power Administration has reported 100 proposed transmission projects in response to its request for interest in RE grid projects, which is supported by US$3.25 billion borrowing authority as part of the ARRA.

This issue has also seen the proposal of the European Economic Recovery Plan (EERP) (see page 11) set before the European Council. The planned spend includes backing for specific grid, carbon capture and offshore wind projects.

Also announced in the period was the European Commission’s intention to allocate a significant amount of the Cohesion Policy monies to support the building of a green economy in Member States.

These two European announcements have influenced the infrastructure score of the affected EU Member States in the all renewables index, for further details see page 11.

Also in this issue, the solar index has been enhanced through the creation of dedicated solar PV and CSP indices. This has impacted all countries in the All renewables index (see page 21 for further details).

China retains sole occupancy of third place in the all renewables index, following consistent governmental support despite the economic downturn and retaining long-term growth expectations.

In India, the federal government has announced a revised target of 10% renewable energy by 2012 from the current installed base of under 8%. This has enhanced India’s overall score by one index point.

All renewables index at May 2009

Rank1 CountryAll

renewables Wind indexOnshore

windOffshore

wind SolarBiomass/

other GeothermalInfra-

structure2

1 (1) US3 70 71 75 58 73 63 67 68

2 (1) Germany 66 67 66 71 65 64 60 64

3 (3) China 63 67 71 55 46 54 58 64

4 (4) India 62 63 70 42 61 56 43 60

5 (5) Spain 61 62 67 46 67 54 36 65

6 (7) Italy 59 59 64 46 64 55 65 64

7 (6) UK 58 63 61 67 38 56 35 61

8 (9) France 57 59 60 54 53 57 28 58

9 (8) Canada 54 59 63 45 32 46 30 58

9 (10) Portugal 54 56 61 43 51 45 33 58

11 (10) Ireland 52 57 58 57 28 47 27 60

12 (13) Australia 51 51 54 43 57 46 60 55

12 (10) Greece 51 53 57 42 56 42 33 55

14 (14) Sweden 50 52 52 51 35 55 34 52

15 (15) Netherlands 46 49 50 49 37 40 21 42

15 (16) Poland 46 49 53 39 34 41 22 46

17 (16) Denmark 45 48 45 54 32 45 32 50

17 (16) Belgium 45 50 48 55 28 35 26 47

17 (19) Norway 45 48 49 45 24 44 30 49

20 (20) Brazil 44 44 48 34 40 46 20 41

21 (21) New Zealand 42 46 50 36 25 33 43 41

21 (21) Japan 42 44 46 38 43 33 38 45

21 (23) Turkey 42 43 46 36 40 36 42 44

24 (24) Austria 34 31 41 0 43 47 35 48

25 (25) Finland 33 33 32 35 20 47 22 33

Source: Ernst & Young 1. Ranking in issue 20 (February 2009) is shown in brackets 2. Combines with each set of technology factors to produce the individual technology indices 3. This indicates US states with renewable portfolio standards (RPS) and favorable renewable energy regimes


Canada has fallen one point in the all renewables index due to the failure of the Canadian federal budget to deliver support to existing renewable technologies by not extending the existing ecoENERGY program. As a result, reserves for the tariff will likely all be allocated within the current year.

The proposed EERP promises subsidies to specific grid link projects with a combined value of €910 million as well as subsidies for specific offshore wind projects totaling €565 million of support.

On 9 March 2009, the European Commissioner for Regional Policy announced that €105 billion of the budget set aside for the Cohesion Policy between 2007 and 2013 would be invested in the green economy. Of this, €4.8 billion has been allocated for the renewable energy sector within Member States.

The combined impact of the proposed EERP, and the recent announcement regarding allocation of Cohesion Policy funds to the green economy, have led to a raft of single point rises in European countries in the Long-term wind index.

Also in the Long-term wind index, China has risen one point due to continued support for green energy from the primarily government-owned utilities providing stability to the electricity market.

India’s score has strengthened one point on the back of increased wind tariffs in Gujarat and a confirmation by the government on a new renewable energy target of 10% of capacity by 2012.

The Swedish government has indicated that simplification of the authorization procedures for wind farms is being considered. The motioned abolition of existing ‘double regulation’ has helped boost the Swedish score by one point.

Long-term wind index at May 2009

Rank1 Country Wind index Onshore wind Offshore wind

1 (1) US2 71 75 58

2 (1) China 67 71 55

2 (3) Germany 67 66 71

4 (4) UK 63 61 67

4 (5) India 63 70 42

6 (5) Spain 62 67 46

7 (7) Canada 59 63 45

7 (8) Italy 59 64 46

7 (11) France 59 60 54

10 (8) Ireland 57 58 57

11 (11) Portugal 56 61 43

12 (8) Greece 53 57 42

13 (13) Sweden 52 52 51

14 (13) Australia 51 54 43

15 (15) Belgium 50 48 55

16 (17) Netherlands 49 50 49

16 (15) Poland 49 53 39

18 (18) Denmark 48 45 54

18 (19) Norway 48 49 45

20 (20) New Zealand 46 50 36

21 (21) Japan 44 46 38

21 (21) Brazil 44 48 34

23 (23) Turkey 43 46 36

24 (24) Finland 33 32 35

25 (25) Austria 31 41 NA

Source: Ernst & Young 1. Ranking in issue 20 (February 2009) Long-term wind index is shown in brackets 2. This indicates US states with RPS and favorable renewable energy regimes


Tax credit or grant

Ranking Issue 21 Issue 20

All renewables index 1 1

Long-term wind index 1 1

Near-term wind index 1 1


The onshore wind sector in the US continues to perform well, reflected by an announcement by the American Wind Energy Association stating that capacity totaling 2,836MW was installed in Q1 2009. Nine states now have over 1GW of onshore wind capacity installed.

This impressive rate of construction, however, is not expected to continue. Those projects coming online now were driven by a rush seen in the industry to close deals before the production tax credit system was due to expire at the end of 2008. This, combined with the recent economic turmoil, will slow the rate of projects coming online during 2009 and into 2010.

The offshore wind and marine sectors took a step forward when the Department of the Interior issued a framework for the leasing of the Outer Continental Shelf (OCS) for offshore wind, tidal and wave projects. The process, as discussed when announced in the Q4 2007 issue of the Country Attractiveness Indices, will be overseen by the Minerals Management Service (MMS) and includes regulation on rules for leasing, easements, rights of way, and methods of revenue sharing with coastal states. The revenue sharing rules provide that 27.5% of the royalties will go to the coastal state.

NRG Energy, Inc. has signed an agreement with eSolar to develop 500MW of solar CSP plants in California and the southwest US. NRG will invest approximately US$10 million for equity and associated development rights for three projects.

Lauren Engineers & Constructors recently signed a contract with Florida Power & Light as the engineering, procurement and construction contractor for a new 75MW CSP plant located near Indiantown, Florida. The project will use parabolic trough technology and connect to an existing combined-cycle gas power plant.

Florida Power & Light has also announced they will build a 75MW solar PV plant at Babcock Ranch, Florida. Subject to Florida State approvals, construction of the Florida Power & Light solar facility is expected for Q4 2009.

Pacific Gas and Electric Company (PG&E) plans a five-year program to develop up to 500MW of solar PV power in its northern and central California service area. The proposed program consists of up to 250MW of utility-owned PV generation and an additional 250MW to be built and owned by independent developers under a ‘streamlined regulatory process.’ PG&E hopes for approval from the California Public Utilities Commission later this year. Expected to be up and running by 2015, the solar PV projects are expected to deliver more than 1,000GWh of solar power annually. In all, the program could meet over 1.3% of PG&E’s electricity demand.

All these stories and more are explored in detail in the US states Attractiveness Indices.

Contact:Michael Bernier Tel: +1 617 585 0322 Email: [email protected]

Fred Copeman Tel: +1 617 375 2484 Email: [email protected]

Country focus – US

US state all renewables index top 5

Ranking1 StateAll renewables

indexLong-term wind

indexLong-term solar

index2Biomass

indexGeothermal

indexInfrastructure

index3

1 (1) Texas 72 80 67 61 63 76

2 (2) California 66 66 80 79 75 81

2 (2) New York 66 72 60 64 60 59

4 (4) New Mexico 62 67 68 53 65 76

4 (6) Massachusetts 62 65 63 68 67 75

Source: Ernst & Young US Attractiveness Indices 1. Ranking in Q4 2008 long-term wind index in brackets 2. Solar index represents the index score for both large- and small-scale solar


Country focus – GermanyFeed-in tariff





Source: Ernst & Young 1. Joint

Project news dominates activity in Germany this issue; for instance, DIF Renewable Energy (DIF), part of private equity player Dutch Infrastructure Fund, has acquired 26.7MW of German wind assets from e.n.o. energy. DIF has also completed the acquisition of a 16MW German wind project from Renerco Renewable Energy Concepts. The agreement with e.n.o. energy comprises the purchase and financing of five wind farms in the states of Brandenburg, Saxony and Saxony-Anhalt, while the agreement with Renerco Renewable Energy Concepts is the acquisition of one wind farm in northeast Germany.

Also in the wind sector, Germany’s Allianz Specialised has acquired a 24MW wind farm in Brandenburg, from Denker & Wulf, as part of Allianz’s alternative asset investment activities.

In the solar sector, First Solar and juwi Holding AG have secured financing for a 53MW PV power plant near the German city of Cottbus. More than 80% of the required project capital is financed

through non-recourse debt from a consortium of banks. First Solar and juwi intend to sell the majority of the project after its completion. Construction of the project began in January 2009, and the first 15MW have been completed. The remaining 38MW are scheduled to be completed by the end of 2009.

Ersol, part of the Bosch Group, has begun the expansion of its solar production, setting up a new manufacturing facility for crystalline solar cells and modules in Arnstadt. €530 million will be invested in the new production unit between now and 2012.

The biomass sector saw Epuron, a subsidiary of Conergy, sell two of its biogas projects with a total output of 1.25MW to renewables investor CEE Bioenergie Holding. The financial holding company is developing its own portfolio of biogas projects by acquiring existing biogas plants and installing new medium-sized plants (500kW to 2MW). The two companies are planning to develop their partnership in the future.

Contact:Andreas Luecke Tel: +49 40 36132 12560 Email: [email protected]

Robert Seiter Tel: +49 30 25471 21415 Email: [email protected]




Country focus – ChinaTender






On 1 May 2009 the Chinese National Energy Administration reported an increase in its 2020 wind power target from 30GW to 100GW. This tripling of the wind power capacity goal formalises the rate of growth the industry already displays and ties in with existing capacity forecasts. Hence the raised target has already been factored into our country attractiveness indicies scores. 12GW were installed by the end of 2008 (Source: Global Wind Energy Council) and we are predicting 46GW over the next five years. That would total 58GW by the end of 2013, which is already well in excess of the original goal of 30GW by 2020. Extrapolating at 10GW per year, capacity would exceed 100GW by 2020. In addition to extensive wind resource in its north and northwest regions, China is also now developing wind farms off its eastern and southern coasts, driving up installed capacity.

The Chinese renewables market, especially within the wind sector, appears to be weathering the credit crunch relatively well due to the influence of the state on the major energy utilities.

In onshore wind, Dutch renewables company Econcern has signed agreements to invest a total of €863 million in onshore wind farms in China. The agreements represent over 720MW of capacity. Econcern has signed term sheets for three onshore wind farm projects with CNOOC New Energy, a full subsidiary of China National Offshore Oil Corporation, and for one onshore wind farm project with Sinohydro Renewable Energy, a full subsidiary of Sinohydro Corporation. The two deals combined will make Econcern a major player in the Chinese sustainable energy market. Construction of the projects is expected to start in 2009.

Developments in the offshore wind sector saw renewable energy consultancy SgurrEnergy appointed by the EU-China Energy and Environment Programme to advise on the potential for China to exploit its offshore wind resource. Glasgow-based SgurrEnergy, which set up a base in Beijing in 2006, will work in partnership with the China Meteorological Administration (CMA) to assess whether it is economically viable to construct offshore wind farms along a 10,000km stretch of coastline from Fujian to Shandong.

Contact:Alex Ng Tel: +86 10 5815 2865 Email: [email protected]

Country focus – SpainFeed-in tariff






The Spanish central government has authorised 88.7MW of new solar PV projects in its first call to tender since the legislation was passed in September 2008. The legislation (Royal Decree 1578/2008 discussed in Q3 2008) was designed to slow down the rapid growth of the solar PV sector in Spain to a financially manageable level. The new rules set an annual quota of 500MW of installed PV capacity, split between the four quarters.

Reduction in solar PV tariffs and a market cap has prompted a rise in interest in CSP. The target for 2010 is for 500MW of installed solar thermal capacity. Spain currently has approximately 225MW of installed CSP capacity and market expectation is that a further 500MW will be added in the next year, allowing Spain to push past its 2010 target. Lobbying to extend the target and the tariff cap is currently underway.

The solar CSP sector is driving the project news this issue, with Acciona starting construction work on a 50MW CSP plant in Majadas de Tiétar, southwest Spain. The plant will enter service in the second half of 2010 and, by the end of 2010, Acciona plans to have five CSP plants in operation, four in Spain and one in the US, accounting for an overall investment of around €1.25 billion. This particular project requires an investment of €237 million.

Also in the CSP market, Grupo Ibereolica and Inveravante have signed an agreement to start the joint construction of two 50MW CSP plants in Andalucia and Extremadura. With a €600 million investment, these are the first two solar projects of a total of eight which the company plans to build and operate in Spain.

In offshore wind, Spain is expected to open a tendering process for 3GW of offshore wind sites. This is the start of a process which could see wind farms coming online by 2013.

Contact:Pablo Tramoyeres Galvan Tel: +34 91 5727 380 Email: [email protected]

Juan María Román Gonçalves Tel: +34 94 4243 777 Email: [email protected]



Country focus – IndiaFeed-in tariff






The Central Electricity Regulatory Commission (CERC) is soon to announce a tariff regulation for renewable power. Currently 15 out of 28 states have set quotas for renewable energy purchase. Those states which do not have sources of renewable energy would have to buy renewable energy certificates from the states which have surplus power. CERC proposes to bring out a detailed discussion paper to finalize the setting-up of a renewable power exchange where such certificates would be traded.

Many of the state governments have recently announced an increase in their wind power tariffs. Gujarat has announced an increase from US$68/MWh to US$70/MWh, Madhya Pradesh from US$80/MWh to US$81/MWh and Tamil Nadu from US$58/MWh to US$68/MWh.

Gujarat has announced its Solar Power Policy 2009, which provides for a maximum solar power generator (SPG) capacity in the state of 500MW; minimum capacity of each SPG should be 5MW.

New solar tariffs in Gujarat

Solar PV (US$/MWh) Solar CSP (US$/MWh)First

12 yearsYears

13-25First

12 yearsYears

13-25Projects commissioned before 31/12/2010

254 59 195 59

Projects commissioned before 31/03/2014

234 59 176 59


Himachal Pradesh has also announced tariffs of 204 US$/MWh and 177 US$/MWh for solar PV and solar thermal respectively for projects commissioned before December 2009 within the bracket of 1-5MW.

Gujarat has also signed firm proposals for setting up solar power projects with companies like Euro Ceramics (100MW), Reliance, Surya Chakra, Tata Power (200MW), Essar (50MW) and Indiabulls (150MW).

Kolhapur-based Ghodawat plans to invest US$402.3 million in the next three to four years in its wind energy business for setting up wind farms and wind turbine manufacturing facilities. It currently has 55MW wind farms in Maharashtra, Gujarat, Karnataka and Rajasthan.

Bharat Heavy Electricals Ltd. (BHEL) has signed a JV with Kerala Electrical & Allied Engineering Co Ltd. (KEL) for setting up a manufacturing facility for wind power generators. The proposed JV expects to generate a turnover of US$12.3 million by next year.

Himachal Pradesh has granted approval to 3 small hydro projects at Siyul (13MW), Kilhi Bahal (7.5MW) and Shalvi (7MW) amongst a total of 13 hydro projects with capacity of 1,583.5MW. It also approved 27 projects with a capacity of 81.90MW of self-identified hydro projects under the state sector.

A 2MW biomass co-generation plant, at a project cost of US$3.1 million, using plywood waste was commissioned at Bharat Starch Industries at Yamunanagar in Haryana. Haryana Renewable Energy Development Agency (HAREDA) is implementing around 20 such projects totaling 190MW.

Rajasthan is expected to add 100MW biomass-based capacity as per the MoUs signed with various private players such as Sambhav Energy, SM Environmental Technologies, Sathyam Power Ltd., etc.

ETA Ascon Star Group, via subsidiary ETA Powergen Pvt. Ltd., is developing a 10MW biomass project in Virudhunagar district, Tamil Nadu. The proposed INR 463 million (US$9 million) plant will use wood-based biomass feedstock including juliflora, cotton stalk and maize stalk. The firm has submitted its EIA report to Tamil Nadu Pollution Control Board and said that it plans to set up similar biomass projects in other Indian states.

Contact:Sudipta Das Tel: +91 33 6615 3400 Email: [email protected]



Country focus – ItalyGreen certificate and feed-in tariff






AXA Private Equity, the European diversified private equity house, and the industrial company, Tozzi Group, have established a joint venture to invest in the Italian renewable energy sector. The JV, TRE & Partners S.p.a., acts as a holding company and comprises investments in wind farms, hydroelectric and solar projects in Italy. Assets will come from the Tozzi Group’s portfolio. Tozzi Group will have a 55% holding in the JV with the remainder being held by AXA Private Equity.

Construction work has started on the largest PV plant in Italy (24MW). The project is being constructed by SunRay Renewable Energy, which is developing solar power

installations across the Mediterranean region. The Montalto di Castro plant is being managed through a company called Cassiopea PV srl, a subsidiary of SunRay Renewable Energy.

Trina Solar Limited has announced the completion of a 4.7MW PV facility developed by ErgyCapital, an investment company specializing in the fields of renewable energies and energy-saving products. The project, located in the town of Serravalle Scrivia in the Piedmont region of Italy, is currently Italy’s largest PV facility and single roof-mounted solar system, involving approximately 38,000 square meters of solar panels.

Contact:Robert Giacomelli Tel: +39 02 80 66 92 68 Email: [email protected]

Angelo Era Tel: +39 06 6753 54 69 Email: [email protected]


Country focus – UKGreen certificate and feed-in tariff






This issue has seen the release of the UK Budget 2009. The budget set a global precedent by introducing the first carbon budgets. These commit the UK to the first three years towards a target reduction in carbon emissions by 34% of 1990 levels by 2020.

The budget also announced proposed changes in the offshore wind Renewables Obligation banding, increasing the ROCs earned from offshore wind generation from 1.5 to 2 for the financial year 2010-11 and 1.75 for the year 2011-12. This is expected to provide GB£525 million support from 2011 to 2014.

Following the closure of Round 3 of the Crown Estate UK offshore wind auctions, the Crown Estate has confirmed it received multiple bids for each of the nine zones. 40 different bids were received from 18 different companies and consortia for the sites. The Crown Estate has issued a positive opinion regarding the healthy interest in the sites and the quality of the bids submitted.

Changes to the system of allocating grid to offshore projects continues. It is likely that the revised process of allocating licenses for the grid connections will remove the pressure on developers’ capital by facilitating construction of the connections by offshore transmission license holders.

In the near term, a program of reshuffling the onshore grid connection queue is to provide revised connection offers to projects which are developing in favor of projects which have slower progress. The second tranche of revised offers is expected soon by developers in Scotland and is expected to be about 457MW of revised offers.

Further grid developments have seen J&S Marine being awarded a contract from the European Marine Energy Centre to provide and install connectivity solutions for wave and tidal projects off Orkney. The connections will allow wave and tidal projects to connect to the wave and tidal hubs and then on to the national grid.

Airtricity and Aquamarine Power have formed a JV with the aim of developing 1GW of marine power around the UK and Ireland. Several potential sites have been identified and any projects will be based on Aquamarine Power’s wave and tidal energy solutions.

In April, Greater Manchester Waste Disposal Authority’s PFI procurement reached financial close, supported by Ernst & Young. This is the largest waste PFI project in Europe, requiring capital expenditure of GB£640 million and a gross contract value over the 25-year term of GB£4.4 billion. Solid recovered fuel will be treated in a 375,000-tonne CHP-enabled waste-to-energy plant which will provide both heat and power direct to Ineos Chlor Vinyls’ Runcorn plant. Other facilities include five anaerobic digestion plants that will be capable of treating over 250,000 tonnes of green and food waste.

Viridor Waste Management Limited, John Laing plc and Ineos Chlor are shareholders in the project. The construction sub-contractors include Keppel Seghers for the waste-to-energy plant and Clarke Haase and Enpure who will deliver the AD plants.

A new GB£500,000 (US$744,000) fund has been launched to help environmental entrepreneurs and small businesses develop their ideas to generate electricity from the river Severn’s tidal power. The scheme is being managed by the Department of Energy and Climate Change, the Welsh Assembly Government, Defra, and the South West of England Regional Development Agency. The Severn Embryonic Technologies Scheme is designed to further develop proposals like tidal reefs and fences and other potential ideas.

Contact:Ben Warren Tel: +44 2 0795 16024 Email: [email protected]


Country focus – PolandGreen certificate






March 2009 saw a focus in Poland on application submissions by renewable energy projects for EU funds. The funds under Priority IX.9.4. amounting to €700 million (EU Structural Funds) are being distributed by Instytut Paliw i Energii Odnawialnej. The deadline for application was 14 April 2009.

There were 120 applications for funds (see table below) amounting to PLN3.15 billion (c.US$890 million) and we await news of successful applicants.

Applications for EU funds by technologyType of project application for EU funds

No. of submitted applications

Wind energy 86Biogas 19Hydro 6Biomass 5Geothermal 2Solar 2

Source: IPiEO

Project activity in Poland during this issue has been centered around wind farm development. Poland experienced a high increase in wind generation capacity from 451MW at the end of 2008 to 547MW as at 28 February 2009.

Issues relating to obtaining grid access are taking on more importance and an amendment to the Energy Act concerning the issue is being discussed. The new draft law which plans to regulate the process of issuing grid connection, however, has met significant criticism.

According to the assumptions used as a basis for Poland’s Energy Policy until 2030, published by the Ministry of Economy in March 2009, development of renewable energy generation is a strategic priority for the Polish energy sector. The document assumes that in 2030 at least 20% of the total energy production in Poland will be generated by renewable energy sources.

RWE Renewables Polska (RWE) has entered into two conditional sale and purchase agreements (SPA) with PEP S.A. for a 30% stake in wind farm sites in Tychowo and Suwałki. Under the terms of the SPA, RWE has paid PLN4 million (US$1.1 million) for the option to purchase the project and will pay a further PLN8.1 million (US$2.3 million) upon operational commencement of the wind farm sites. The two wind farms are to reach 83MW capacity in total.

Also in the wind sector, DONG Energy has acquired the Karcino wind farm project. It is the second wind farm project in Poland. For the acquisition of Karcino (fully permitted project), DONG has paid €5.1 million (US$6.65 million). The project is expected to have an installed capacity of 51MW once constructed.

Contact:Kamil Baj Tel: +48 22 557 8855 Email: [email protected]

Jacek Rodzeń Tel: +48 22 557 6234 Email: [email protected]




Near-term wind index at May 2009

Rank1 Country Wind index1 (1) US2 81

2 (2) China 78

3 (3) India 55

4 (4) Spain 51

5 (4) Germany 50

6 (7) UK 48

7 (7) France 47

7 (9) Italy 47

9 (6) Canada 46

10 (10) Portugal 41

11 (12) Australia 40

11 (11) Ireland 40

11 (12) Greece 40

14 (14) Poland 37

15 (15) Belgium 36

15 (15) Brazil 36

17 (17) Sweden 35

18 (19) Netherlands 34

19 (21) Turkey 33

19 (18) Norway 33

19 (21) Denmark 33

22 (19) New Zealand 32

23 (23) Japan 27

24 (24) Austria 24

25 (24) Finland 23

Source: Ernst & Young 1 .Ranking in issue 20 (February 2009) Near-term wind index is shown in brackets 2. This indicates US states with RPS and favorable renewable energy regimes.

The Near-term wind index takes the perspective of an investor looking to make a commitment within the next two years. The methodology and weightings used to produce the Near-term wind index are different to those of the Long-term index so the two are not directly comparable. The Near-term wind index places a greater emphasis on market growth and takes into account a narrower range of parameters than the Long-term wind index.

In the US, the impact of the ARRA has started to be felt, as a number of projects have started to move forward, for example First Wind’s 204MW Milford Wind Corridor (phase I) project in Milford, Utah. Our forecasts for 2009 have reduced from Issue 20, as we expect installations driven from the ARRA stimulation to be realized in 2010, rather than 2009.

The overall reforecast has driven a gain of two points in the US, while availability of debt finance remains an issue for some projects and holds back the US’ score.

“With the exception of China, MW forecasts show a general reduction in installations in 2009, with a gradual return to long-term installation growth rates over a longer time horizon”

While the US has a clear lead in the Near-term index, it has yet to return to the high of 88 points seen in Q4 2007.

Despite expectations of greater MW installations during the near term than the US, China ranks second in the Near-term index and has maintained ITS score this issue. This is due to market accessibility concerns which, although they have been reducing, are still present.

Spain moves ahead of Germany in the Near-term index as although the majority of projects within Germany’s offshore program are currently progressing as planned, slightly increased risks in the offshore sector driven by the continued economic downturn have reduced Germany’s score. However, Spain’s onshore installations are expected to remain at 2006 and 2008 levels during the recession.

The UK has risen a point to reflect the increased short-term impact of the recent announcement of higher ROC bandings for offshore wind until 2010-11, announced in the recent budget. For details of the new ROC allowance for offshore wind see page 17. This point increase has moved the UK above France and Italy.

Italy fell one point and a position, following expectations that investments from the EU will not support an expected decline in annual MW installation rates over the near term.

Canada has halted its fall seen in issue 20, as forecasts have been realigned with long-term installation expectations.


Offshore wind, marine and tidal focusOffshore wind index – top 10

Rank1 CountryOffshore wind

index1 (1) Germany 71

2 (2) UK 67

3 (3) US2 58

4 (4) Ireland 57

5 (4) China 55

5 (6) Belgium 55

7 (7) Denmark 54

7 (8) France 54

9 (9) Sweden 51

10 (10) Netherlands 49

Source: Ernst & Young 1. Ranking in issue 20 (February 2009) is shown in brackets 2. This indicates US states with RPS and favorable renewable energy regimes

As discussed on page 17, the UK government has announced a tariff enhancement for offshore wind projects over the next two years. Due to the timeframe of the support, the UK’s off-shore score has not risen in the long-term offshore wind index.

In the US, however, the Department of Interior issued a framework for the leasing of the OCS for offshore wind, tidal and wave projects (see page 12 ).

Wave and tidal index – top 10

Rank CountryOffshore wind

index1 Portugal 68

2 Ireland 64

2 UK 64

4 US1 60

5 Australia 53

6 France 52

7 Canada 47

8 New Zealand 44

9 Norway 43

9 Spain 43

Source: Ernst & Young 1. This indicates US states with RPS and favorable renewable energy regimes

North SeaWave energy developer Aquamarine Power announced successful test results from its Oyster wave energy converter, exporting electricity to the national grid at the New and Renewable Energy Centre near Newcastle in the UK. The test confirmed the full-scale device will have a capacity of just over 350kW.

Norway has drafted a new law allowing the government to control offshore developments within its waters. This would cover both offshore wind and wave developments. The law is to be put before the Norwegian parliament before the summer and is likely to be similar to the current legislation covering waterways and oil and gas reserves.

RWE Innogy has acquired rights to the North Sea Windpower project 3 via its acquisition of Energieanlagen. The development will be Germany’s largest offshore wind farm at 960MW.

Statkraft has agreed to purchase a 50% stake from StatoilHydro in the 315MW Sheringham Shoal offshore wind farm off the Norfolk coast.

Irish SeaABB has been awarded a contract to install a 500MW bi-directional transmission line between Ireland and Wales by EirGrid. The connection is hoped to help the market for renewables by providing a larger market to utilize power at times of peak generation.

Black SeaA pilot 5kW demonstration wave energy project was opened in Turkey during this issue period. Importantly, during the opening ceremony the Turkish Energy Minister suggested the government may offer support for wave energy projects. Depending on the level of support, Turkey may well feature in the wave and tidal index top 10 in the future.

Pacific OceanAtlantis Resources has signed an agreement to install a 1MW tidal energy plant in Western Australia.

Also in Australian waters, wave energy developer Carnegie Corporation has signed heads of agreement with Investec Bank outlining their mutual intention to work together. Investec intends to provide up to AU$250 million (US$166 million) provided project milestones and conditions are met.

Contact:Andrew Perkins Tel: +44 1 179 812 325 Email: [email protected]

Arnaud Bouille Tel: +44 1 392 284 392 Email: [email protected]


Feature – solar indices at May 2009

The long-term solar indicesThe solar index has been enhanced this issue with the inclusion of a CSP index. CSP is sometimes referred to as solar thermal electricity generation (STEG).

The solar index now combines the attractiveness of a market for PV industry investment and CSP industry investment with a weighting of 80:20 respectively.

The decision to enhance the solar index with individual PV and CSP indices is driven through anticipated market growth in each market, the different market dynamics and market/technology suitability.

Rank1 CountrySolar index

Solar photovoltaic

Concentrated solar power

1 US1 73 72 75

2 Spain 67 65 71

3 Germany 65 74 28

4 Italy 64 66 60

5 India 61 61 58

6 Greece 56 60 43

7 Australia 55 57 46

8 France 53 61 23

9 Portugal 51 58 22

10 China 46 48 36

11 Japan 43 48 23

11 Austria 43 53 N/A

13 Brazil 40 44 28

13 Turkey 40 43 28

15 UK 38 47 N/A

16 Netherlands 37 47 N/A

17 Sweden 35 43 N/A

18 Poland 34 42 N/A

19 Canada 32 40 N/A

19 Denmark 32 40 N/A

21 Ireland 28 35 N/A

21 Belgium 28 34 N/A

23 New Zealand 25 31 N/A

24 Norway 24 30 N/A

25 Finland 20 25 N/A


We expect the CSP market to grow significantly over the medium term, due to a number of factors. One key driver is the ability to combine CSP plants with other power generation technologies, specifically CCGT plants and create integrated solar combined cycle plants, or biomass facilities. Additionally, CSP plants can employ heat storage facilities, through molten salts or ceramic heat trapping technologies and stretch generation time beyond daylight hours. The combination and creation of hybrid generation facilities allows the development of renewable energy generation assets onto existing infrastructure, therefore improving project economics, and the ability to provide base load power.

The PV market is expected to grow by over 30GW by 2012 and is reaching a mature stage, with many market players spanning large parts of the value chain. However, the solar PV value chain is facing a period of oversupply, compounded by falling silicon prices; we expect consolidation to occur as smaller manufacturers struggle during the recession.

However, a considerable CSP pipeline of around 7GW now exists at a global level, having developed from historically very modest levels. The growth in the CSP sector is supported by a growth in project size. Early CSP projects were installed with less than 50MW capacity, whereas recent and planned projects, employing parabolic trough technology, are starting at 50MW installed capacity and above.

Many developers are stating that grid parity, being the point at which electricity from solar PV costs the same as conventional power, could be reached by 2012-14 in some markets.

Supporting the road to grid parity, tariff degression policies in, for example, Germany and Spain are seen as a way to force efficiencies into the supply chain and lower project costs.

“Supporting the road to grid parity, tariff degression policies in, for example, Germany and Spain are seen as a way to force efficiencies into the supply chain and lower project costs.”


Solar photovoltaic index – top 10

Rank Country Solar photovoltaic

1 Germany 74

2 US1 72

3 Italy 66

4 Spain 65

5 India 61

5 France 61

7 Greece 60

8 Portugal 58

9 Australia 57

10 Austria 53


The solar PV index at May 2009 is led by Germany, whose position is based on a stable tariff regime, albeit with reducing tariffs going forward, and an established domestic supply chain. With the price of silicon falling in line with the general commodity price trend, expectations are that Germany’s installation rate will continue.

The US, in second place in the solar PV index, lies just behind Germany. The US has significant resource as well as a desire to use renewables as a tool to overcome the recession, as seen in President Obama’s stimulation measures announced last issue. The impact of these measures may already be seen, following several manufacturing scale-up and new PV projects announced this quarter.

Third in the solar index, Italy has abundant resource and a strong feed-in tariff, but a market cap of 1,200MW. Administrative processes continue to restrain Italy’s solar PV attractiveness; however, there is hope that these can be resolved and streamlined.

Behind Italy lies Spain in fourth place. The Spanish PV market boomed and installed over 1GW in 2008. However, regulatory changes reduced the tariff and capped the market at 500MW for 2009. This action reduced Spain’s attractiveness relative to its previous position under old legislation. However, Spain still remains an attractive market, as a proven market for PV installations which is well understood by the finance community and developers alike and a 20% to 40% reduction in module prices.

Traditionally strong in the solar PV manufacturing sector, Japan does not feature in the solar PV index top 10. This is a consequence of Japan’s recent support package focusing on domestic and public buildings and not large-scale solar PV farm development.

Concentrated solar power index – top 10

Rank CountryConcentrated solar

power

1 US1 75

2 Spain 71

3 Italy 60

4 India 58

5 Australia 46

6 Greece 43

7 China 36

8 Brazil 28

8 Germany 28

8 Turkey 28


CSP technology requires solar resources over a certain level, which are found approximately between the 40th parallels North and South. As such, countries outside this bracket are not scoring on the CSP index.

The US leads the CSP index at May 2009. The US’ score is driven by world-class resource in south western states and favorable support from Department of Treasury grants.

Just behind the US, Spain has seen significant CSP market growth in recent years and has a considerable proportion of near-term global forecast growth. A strong solar thermal tariff and suitable resources drive Spain into second place. However, issues exist with the tariff which hold Spain back in the CSP index.

The US and Spain are expected to be the two key solar CSP growth markets; as a consequence, there is a significant gap between the US and Spain, and the following countries.

11 index points behind Spain, Italy ranks third in the CSP index at May 2009. CSP projects are being constructed and potential exists to develop more, as the government has provided a feed-in tariff allowing €220/MWh-€280/MWh based on the solar fraction. Italy has sufficient solar resources, especially in the south, to sustain economic CSP generation and is expected to move up the solar CSP index over the forthcoming years.

Just behind Italy, India ranks fourth in the CSP index at May 2009. India currently has no CSP projects; however, CSP forms a major part of India’s National Action Plan on Climate Change, launched in June 2008. A number of states have preferential offtake tariffs which, when combined with a strong resource, has stimulated interest and generated a considerable pipeline. See page 15 for further details on India’s CSP activity.

Feature – solar indices at May 2009 (cont’d)


Commentary — guidance notesLong-term indexAs stated on page 2, the individual technology indices, which combine to generate the all renewables index, are made up as follows:

Renewables infrastructure index – 35% •

Technology factors – 65% •

These guidance notes provide further details on the renewables infrastructure index and the technology factors.

Renewables infrastructure indexThe renewables infrastructure index is an assessment by country of the general regulatory infrastructure for renewable energy. On a weighted basis, the index considers:

Electricity market regulatory risk – 29%: markets that are fully •deregulated score higher, as they have experienced the ‘market shock’ on underlying wholesale prices that this transition may exert. While this may not affect current projects, these effects are particularly important when considering long-term investment prospects.

Planning and grid connection issues – 42%: favorable planning •environments (low failure rates and strong adherence to national targets) score highly. Grid connection scoring is based on the ease of obtaining a grid connection in a cost-effective manner. The score also takes account of the degree of grid saturation for intermittent technologies.

Access to finance – 29%: a market with a mature renewable •energy financing environment, characterized by cheap access to equity and good lending terms, will score higher.

This generic renewables infrastructure index is combined with each set of technology factors to provide the individual technology indices.

Technology factorsThese comprise six indices providing resource-specific assessments for each country, namely:

Onshore wind index1.

Offshore wind index2.

Solar PV index3.

Solar CSP index4.

Geothermal index5.

Biomass and other resources index6.

Other renewable energy resources include small hydro, landfill gas and wave and tidal technologies. Energy from waste is not considered. Each of the indices consider, on a weighted basis, the following:

Power offtake attractiveness – 19%: this includes the price 1. received, the potential price variation and length of PPAs granted. Higher scores are also achievable if a government guarantees the power offtake rather than merchant offtakers.

Tax climate – 11%: favorable, high-scoring tax climates that 2. stimulate renewable energy generation can exist in a variety of forms and/or structures. The most successful incentives and structures have been direct RE tax breaks or brown energy penalties, accelerated tax depreciation on RE assets and tax-efficient equity investment vehicles for individuals.

Grant/soft loan availability – 9%: grants can be available 3. at local, regional, national and international levels, and may depend on the maturity of a technology as well as the geographical location of the generating capacity. Soft loans have historically been used in pioneering countries of RE technologies to kick-start the industry. High scores are achieved through an array of grants and soft loans.

Market growth potential – 18.5%: this considers current 4. capacity compared to published targets. Higher scores are given if ambitious targets have been set and policy framework is in place to accelerate development. The realism of targets is taken into account as well as the seriousness with which they are being pursued (e.g., penalties in place for non-compliance).

Current installed base – 8%: high installed bases demonstrate 5. that the country has an established infrastructure and supply chain in place, which will facilitate continued growth and, in particular, encourage the repowering of older projects.

Resource quality – 19%: for example, wind speeds and 6. solar intensity.

Project size – 15.5%: large projects provide economies 7. of scale and a generally favorable planning environment, which facilitates project development financing.


Near-term wind indexAs stated on page 2, the near-term wind index focuses on factors of most immediate concern to near-term investment in wind energy. The scoring follows the same methodology as for the long-term wind index, but with a more focused set of parameters and a tailored weighting. Therefore, the indices consider the following, on a weighted basis, for both onshore and offshore wind separately:

Power offtake attractiveness – 27% •

Tax climate – 8% •

Resource quality – 14% •

Market growth potential (mid-2009 to mid-2011) – 40% •

Project size – 11% •

In the offshore near-term wind index, countries with no projects estimated to reach construction in the next two years (early 2009 to end 2010) are excluded.

It should be noted that the market growth potential score is based on a view taken of a range of business analysts’ forecasts and Ernst & Young’s own market knowledge. There is significant variation between analysts’ views on each market, and within some markets, the variation is greater than in others. The forecasts used are a market view only and the scores in no way guarantee that the forecasted capacity will be built.

While comparisons have been made between scores in the long-term and near-term wind indices, it should be emphasized that, due to the different weightings and parameters used, these cross-comparisons are of a narrative nature only and by no means indicate any quantitative valuation.

Commentary — guidance notes (cont’d)


GlossaryAbbreviation Definition

AD Anaerobic Digestion

CAI Country attractiveness index

CCGT Combined cycle gas turbine

CHP Combined heat and power

CSP Concentrated solar power

EIA Environmental impact assessment

EU European Union

GDP Gross domestic product

GW Giga watt

GWh Giga watt hour

IPO Initial public offering

ITC Investment tax credit (US)

JV Joint venture

km Kilometer

KW Kilowatt

M&A Mergers and acquisitions

MoU Memorandum of understanding

MW Mega watt

MWh Mega watt hour

MWth Mega watt therm

OEM Original equipment manufacturer

P/E ratio Price-earnings ratio

PFI Private finance initiative

PPA Power purchase agreement

PTC Production tax credit (US)

PV Photovoltaic

RE Renewable energy

ROCs Renewables Obligations Certificates

TWh Terra watt hour


Company index

Company Page

ABB 20

Acciona S.A 9, 14

Act Solar 8

AIG Financial Products Corp 8

Airtricity 17

Aktiv Wind 8

Alberta Wind Energy Corporation (AWEC) 8

Allianz Specialised Investments 13

Allied Engineering Co Ltd (KEL) 15

Amper Central Solar S.A 9

Aquamarine power 16, 20

Archimede Solar Energy 9

Atlantis Resources 9, 20

AXA Private Equity 16

Baugrund Sued Gesellschaft fuer Geothermie mbH 9

Bharat Heavy Electrical Ltd (BHEL) 15

Bharat Starch Industries 15

Bord Gais Eireann 8

Borusan Holding 8

Bosch Group 12

BP 9

Bremer 9

Carnegie Corporation 20

Cassiopea PV srl 16

CEE Bioenergie Holding 13

China Guangdong Nuclear Power Group 8

China Guangdong Nuclear Wind Power Co 8

China Meteorological Administration (CMA) 14

China National Offshore Oil Corporation 14

CLP Holdings Limited 9

CNOOC New Energy 14

Conergy 13

Company Page

Denker & Wulf 13

Deutsche KWK GmbH 9

DIF Renewable Energy 13

DONG Energy 8, 17

Dutch Infrastructure Fund 13

e.n.o. energy 13

Econcern 14

EDP Renovaveis 7

EDP Renovaveis Brasil 8

Eirgrid 20

EnBW 8

Enel 8

Energieanlagen 20

Epuron 13

ErgyCapital 16

Ersol 13

eSolar 12

Essar 15

ETA Ascon Star Group 15

ETA Powergen Pvt. Ltd 15

Euro Ceramics 15

EuroTrust 8

First Solar Inc 8, 9, 13

First Wind 19

Fotowatio Renewable Ventures, Inc 9

FPL, Florida Power and Light 7, 12

Ghodawat 15

Global Yatirim Holding AS 9

Greater Manchester Waste Disposal Authority 17

Grupo Ibereolica 15

Haryana Energy Development Agency 15

HgCapital Renewable Power Partners Fund 8

Hydro Tasmania 8

Company Page

IBC Solar AG 9

Iberdrola 7

Iberdrola Renovables 7

Indiabulls 15

Ineos Chlor 17

Innovent GmbH 8

Instytut Paliw i Energetyki Odnawialnej 18

Inveravante 14

Investec Bank 20

J&S Marine 17

John Laing PLC 17

Juwi Holding AG 9, 13

Keppel Seghers 17

Kerala Electrical & Allied Engineering Company (KEL) 15

Lauren Engineers & Constructors 12

Mainstream Renewable Power 8

Max Weishaupt GmbH 9

Mitsubishi Corporation 9

MMA Renewable Ventures LLC 9

Morgan Stanley 9

Municipal Mortgage & Equity LLC 9

National Semiconductor Corporation 8

Nippon Oil Corporation 8

NordLB 9

OptiSolar Inc 8

Park Wiatrowy Suwalki Sp zoo 8

Park Wiatrowy Tychowo Sp zoo 8

PEP S.A 18

Pacific Gas and Electric Company (PG&E) 8, 12

Polish Energy Partners SA 8

Pro2 Anlagentechnik GmbH 9

Reliance 15


Company index (cont’d)

Company PageRenerco Renewable Energy Concepts 13

Roaring 40s Renewable Energy Pty Ltd 8

RWE Innogy 9, 20

RWE Renewables Polska 8, 18

Sambhav Energy 15

Sathyam Power Ltd 15

SgurrEnergy 14

Shell 7

Siemens 9

Sinohydro Corporation 14

Sinohydro Renewable Energy 14

SM Environmental Technologies 15

Sorne Wind Limited 8

Space Energy Corporation 8

Statkraft 9, 20

StatoilHydro 20

SunRay Renewable Energy 16

Surya Chakra 15

Tata Power 15

Tozzi Group 16

TRE & Partners S.p.a 16

Trina Solar Limited 16

Viridor Waste Management Limited 17

Western Area Power Administration 10

Westphalia-Lippe Agricultural Association 9

White Owl Capital AG 9

Windfarm Elebras Cidreira 8

Xinjiang Goldwind 7

Yesil Enerji AS 9

ContactFor 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 [email protected]

Andrew Perkins Director [email protected]

Dane Wilkins Director [email protected]

Arnand Bouille Director [email protected]

Enquiries to the Guest Columnist Jonathan Johns should be addressed to [email protected]

Country attractiveness indices production supported by:

Phil Dominy Senior Executive – Project Finance [email protected]

Mark Porter Executive – Project Finance [email protected]

Sam Reed Executive – Project Finance [email protected]

Financial advisory and valuation •

Financial modeling and structuring •

Taxation •

Finance raising •

Asset value optimization •

Market entry strategy •

Procurement strategy •

PPA tendering •

Feedstock strategy •

Transaction support •

PE advice •

IPO advice •

JI/CDM financing •

Strategic partnering •

Strategy review •

Technologies •

Onshore and offshore wind •

Biomass •

Biofuels •

Energy from waste •

Wave and tidal •

Solar •

Fuel cells •

CHP •

Landfill gas •

Hydro •

Carbon capture and storage •

Ernst & Young Renewable Energy GroupWith a dedicated 50-strong team of international advisors operating from our UK member firm, supported by a network of over 65 experienced professionals from our member firms worldwide, Ernst & Young’s Renewable Energy Group helps clients to increase value from renewable energy activity. Members of the group provide advice and services in the following areas:

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

For more information, please visit www.ey.com.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

EYG no. DE0085

© 2009 EYGM Limited. All Rights Reserved.

This publication contains information in summary form and is therefore intended for general guidance 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 global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

DPD11261.indd (UK) 05/09. Artwork by London DPD.

http://www.ey.com/renewables



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