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February 2012 Issue 32

Renewable energy country attractiveness indices

Global highlights
In this issue:
Overview of indices Post Durban: can community renewables and smart grid brighten a low-margin decade? Middle East and North Africa focus Liquidity constraints set to hamper project finance deals in 2012 M&A and IPO activity All renewables index Wind indices Solar indices Country focus China, US, Germany, UK, France, Canada, South Africa, Portugal, Greece, Mexico Commentary guidance notes Company index Glossary Contacts Recent Ernst & Young publications 2 While 2011 saw record levels of new investment into clean energy, especially solar, the outlook for 2012 is far less certain, particularly in the West. The sovereign debt crisis continues to stifle the Eurozone, and also policy setters ambitions in relation to renewable energy deployment. Capital scarcity and increased competition from Asia will continue to put pressure on Western players for the foreseeable future. All this points to almost inevitable consolidation of the wind and solar sectors, and also increased vertical integration as equipment manufacturers seek ever more innovative routes to market. Emerging markets will continue to prosper in 2012, thanks to ambitious installations programmes securing investments, while the more established countries will endure increasing constraints. Only five years ago, Spain was the most attractive country for renewable investment, but today it has dropped out of the top ten as the Government has temporarily suspended premiums paid to all new renewables plants. A similar suspension has occurred in Portugal, while other countries (such as Italy and Ireland) cut feed-in tariffs (FITs) and other support mechanisms. There is no change at the top of this edition of the CAI. But while China continues its prominence, some mixed signals have emerged: increased solar targets (15GW by 2015) to soak up excess supply, together with grid infrastructure issues that are preventing wind connections. And while domestic market growth plateaus, Chinese corporates are increasingly looking to Europe to acquire stakes in relatively low-priced targets. For example, China Three Gorges has purchased a significant portion of Energias de Portugal and LDK Solar has offered to purchase Germanys Sunways. Meanwhile, the US (in 2nd position) has completed a bumper year for the wind industry. The now-expired Treasury Grants and loan guarantee program underpinned a surge to around 7GW of installed capacity. And recently, President Obama appeared to indicate that the Production Tax Credit (PTC) support mechanism would be extended beyond 2012, and we have scored the US on this basis. Third placed Germany gained a point due to continued funding for renewables to fill the nuclear gap. Development bank, KfW, and utilities RWE and E.ON have promised hefty investments in coming years. The solar PV market boomed in 2011 with more than 7GW, but a 15% tariff cut and the threat of monthly reductions will suppress activity in 2012. Emerging markets have grabbed most of the good news headlines. South Africa has moved up seven places on the back of a very successful first round of a new tender bidding process, totaling 1.4GW of new capacity. South Korea climbed a point across all technologies with Government backing for bold ambitions, especially in offshore wind. Romania and Ukraine also increased their appeal mainly due to strong wind markets. Another part of the world that holds great potential for renewable generation is the Middle East and North Africa especially for solar power, and this issue of the CAI includes a special focus article on this region. Most of the countries already have operational pilot projects as well as ambitious plans for significantly sized installations. The lead article in this issue reflects on current events and discusses the future benefits of more distributed ownership and generation through community based schemes and smart grid networks. This upbeat vision for the future is tempered by the debt focus article, which examines how current liquidity constraints are likely to hamper project financing deals through 2012.

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Overview of indices: Issue 32

The Ernst & Young CAI 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 quarterly basis. The CAI take a generic view and different sponsor or financier requirements will clearly affect how countries are rated. Ernst & Youngs 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 page 28 referring to the indices.

Individual technology indices

These 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 index

This provides an assessment, by country, of the general regulatory infrastructure for renewable energy page 14.

Long-term indices
The long-term indices are forward looking and take a long-term view (up to five years); hence, the UKs 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 (RO) mechanism. Conversely, although Denmark has the highest proportion of installed wind capacity to population level, its score is relatively low because of its restricted grid capacity and reduced tariff incentives.

Technology factors
These provide resource-specific assessments for each country.

Long-term wind index

This index is derived from scoring: The onshore wind index 70% The offshore wind index 30%

All renewables index

This index provides an overall score for all renewable energy technologies. It combines individual technology indices as follows: 1. Wind index 65% (comprising onshore wind index and offshore wind index) 2. Solar index 18% (comprising solar photovoltaic (PV) index and concentrated solar power (CSP) index) 3. Biomass and other resources index 17%

Long-term solar index

This index is derived from scoring: The solar PV index 73% The solar CSP index 27% For parameters and weightings see page 28.

Comments and suggestions

We 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 websites or or contact either: Ben Warren: Andrew Perkins: Arnaud Bouille: Ernst & Young was ranked the leading project finance advisor in the Americas, Europe, Middle East and Africa between 2001 and 2011 by Project Finance International. Enquiries to the guest columnist should be addressed to The most appropriate way to access historical information in Bloomberg is from Ernst & Young Renewable Energy Total Renewable CAI page: {EYRE<GO>}. Each value can be evaluated to reveal history.

Renewable energy country attractiveness indices February 2012 Issue 32

Post Durban: can community renewables and smart grid brighten a low-margin decade?
Ernst & Young guest columnist Jonathan Johns
The COP17 agreement in Durban to sign up to an unspecified legally binding treaty by 2020, was welcome but weak. It did not remove carbon and climate change wholly from the agenda, but it hardly provided an imperative to invest. Indeed, the subsequent withdrawal of Canada, Japan and Russia from the Kyoto Protocol, fresh after the home planes had landed, foretells the difficulties to come. The 2015 to 2020 negotiations will thus take place at a time when a material increase in global emissions by the new growth economies is likely to have outstripped any reductions in the West, even after any impacts from a recession. Higher rises in global temperatures than the two to three degrees currently contemplated may by then be on the cards if emerging scientific consensus is accepted. Post Durban, renewables will need to compete within a wider investment class for funds. Renewables no longer has the climate change investment arena largely to itself. Forwardlooking investment is likely to flow to energy efficiency and climateaffected scarce resources (e.g., water infrastructure). In January 2012, the Chinese Investment Corporation placed its first significant investment in the UK, with a 9.9% stake in Thames Water. This followed a similar investment a month earlier by the Abu Dhabi investment authority, the latter having already invested in the London Array offshore wind farm through Masdar. Post Durban, carbon trading will not bank the renewable investment challenge. Largely due to the impact of continued recession and the euro crisis, carbon prices in Europe could well struggle to get materially beyond current low levels of 7/tonne to 8/tonne (for European Union Allowances EUAs) unless a reserve price is adopted, as some parties are suggesting. In addition Certified Emissions Reduction certificates carbon credits based on emissions reduction projects in the developing world fell to 3.28 per tonne on the EU Emissions Trading Scheme (ETS) last week, half the price of European Emission Allowances, which are themselves near historic lows. This has had the side effect of reducing European funds available for investment in clean energy sourced from carbon credit sales budgeted at higher levels. By turning away from setting a global carbon price, Durban has pushed the spotlight back to individual countries domestic support mechanisms. Investment in renewables in the poor developing world is likely to be left in limbo and at the mercy of flagship funds, such as the Durban fund whose announcement, while welcome, was not accompanied by concrete and immediate funds. In the West, the political imperative has moved more to financial housekeeping and away from the inconvenience of climate change. The continued recession is acting as a brake on policy intervention, as renewables-friendly stimulus measures are not always renewed and their perceived generosity is challenged. Concerns about the impact of rising energy prices on industry costs and fuel poverty are already having an impact on policy-makers. However, the fact that investment today reduces exposure to rising fossil fuel prices tomorrow does still strike a chord. Delaying action is a false economy: for every US$1 (0.8) of investment avoided in the [renewable/low carbon] power sector before 2020, an additional US$4.3 (3.3) would need to be spent after 2020 to compensate for the increased emissions. World Energy Outlook 2011, IEA. Witness also the UK s low carbon roadmap to 2050, which makes clear that a fossil fuel strategy is very much the most expensive option. Such arguments pose challenges to more and more Governments, as their immediate investment firepower is constrained, if not neutered, by excessive levels of sovereign debt and, in terms of targets, 2050 is discussed with greater interest as it becomes increasingly possible that 2020 targets will not be met. The sovereign debt crisis has also renewed pressure on the European banking sector. Historically a global anchor for renewables project finance, the European banking sector has reduced capacity to lend and has frozen loan portfolios. New lending, with a few exceptions, is restricted to strong sponsors selected from existing (often domestic) customer relationships. This puts further pressure on Governments to provide financial support through vehicles such as the European Investment Bank (EIB) and the Green Investment Banks or loan guarantees, although this is unlikely to arrive in the volume required. The UKs very welcome Green Investment Bank initiative illustrates the dilemma, as its ability to borrow will only come into play once certain Government debt targets have been reached. With the prospect of further recession, these targets could become more distant.

Renewable energy country attractiveness indices February 2012 Issue 32

Post Durban: can community renewables and smart grid brighten a low-margin decade? (contd)
The heat is on the renewables sector to deliver on the basis of value per carbon tonne saved and not just MW of capacity installed as Governments have their eye on the impact of rising energy prices on their electorates and on the fuel poor. In Spain, the impact of the credit crunch has been graphically illustrated with new renewable schemes suspended. Spain first reduced support for renewables in September 2008 as a means of dealing with its tariff deficit which, around May 2009, had reached 14b, not only because of support given to renewables through generators electing to take market exposure through its cap and collar premium tariff system, but also due to the below market last resort tariffs granted to some five million low income households. The intention had been to securitize debt to remove tariff deficits from utilities balance sheets on the basis of Government guarantees and future tariff increases, but the credit crunch reduced markedly the ability to issue such debt and the euro crisis recession has made tariff increases difficult. By the end of 2011, the tariff deficit had ballooned to 24b, with further increases of 3b to 4b anticipated in 2012. Consequently, the Spanish Government has ceased all new renewable support overnight while a solution is investigated. The outcome at best is likely to be further tough reductions in tariffs with a battle between wind and solar. This situation illustrates the difficulties faced when aspiration and affordability part company, with premature booms unhelpful to the long-term development of the industry if they are followed by sudden shock busts. In microcosm, similar issues are behind the determination of the UK Government to hold to its solar PV tariff reductions by making successive court appeals following rulings that retrospective change was unlawful. It has also proposed further cuts combined with an automatic downward adjustment mechanism. Even in Germany strong debate is taking place over proposals that solar PV capacity should be the subject of a 1GW limit (compared to in excess of 7GW installed last year) as well as a further downward monthly price adjustment. Notwithstanding President Obamas supportive State of the Union address, and recent budget request for increased funds to allow the renewal of the PTC, further treasury grants and continued support for cleantech manufacturing, implementation of these measures before the presidential election, is in doubt. This is critical as the combination of the Treasury Grant programme with the PTC has created a support regime as attractive as a FIT, underpinning the high ranking of the US in the CAI. For industry, it is no consolation that the pre-presidential election PTC renewal ritual has recurred, as delay has invariably had detrimental effect. High-profile utility investors. such as Iberdrola, have already announced a moratorium on new development activity and manufacturers, such as Vestas, are warning of plant closures in wind, to follow on from those in the solar sector. As policy priorities in most Western jurisdictions shift to the general economy with less emphasis on cleantech and renewables, challenges from low-cost Asian producers have proved difficult to counter so much so that protective tariff arguments are starting to re-emerge (in the US and elsewhere). Legislators are building policy predicated on steady falls in technology prices. As grid parity approaches, automatic downward adjustment to tariffs in circumstances of excess demand and/or annual capacity quotas may well become the norm. Some jurisdictions may switch to a tendering process that in Brazil has seen onshore wind compete head to head with gas. For example, the UK Governments response to consultation on its new large-scale contract for difference FIT indicates that, while for the present it accepts that it should set prices, it reserves the right to move toward a more tendered approach as 2020 nears. In the US, the challenge of grid parity is made harder by plentiful shale gas, which has reduced gas prices to circa US$3/mmBtu (2/mmBtu) in 2011 (US Henry Hub prices), making the renewal of the PTC even more necessary if wind is to compete. This challenge could be exported as permissions have been sought to convert US LNG ports to be bidirectional so they can access higher price overseas markets (with gas in Europe at circa US$12/mmBtu (9/mmBtu) and Asian circa US$18/mmBtu (14/mmBtu)).

Renewable energy country attractiveness indices February 2012 Issue 32

Post Durban: can community renewables and smart grid brighten a low-margin decade? (contd)
These challenges overshadow the New Year announcements that a record 27.7GW of global solar PV were installed in 2011 (up from 16.6GW in 2010, source: EPIA), and a 33% increase occurred in US wind installations to 6.8GW, according to the American Wind Energy Association (AWEA). A process of Darwinian selection is under way and could well be brutal both for Western and Asian manufacturers as we go further into a low-margin decade. It seems inevitable that increased market share will flow to Asia, although these manufacturers are increasingly likely to set up partial assembly in the West using the financial firepower of their banks and infrastructure funds to assist; as seen by recent Chinese investments in the US and Europe and Korean player Samsungs announcement of the manufacture in the UK of its 7MW offshore turbine. Consolidation may well be a necessary stage for the industry to come of age and to enable it to reduce prices still further. Utilities which are themselves cash constrained in many cases will need to access further monetary flows from Asia or sovereign funds. This is evidenced by EDP, which has recently received a 21% investment by Chinas Three Gorges Corporation accompanied by a large package of financing following Iberdrolas earlier strategic partnership with Qatar Holding and E.ONs relationship with Masdar. As equity markets recover, it may well be that direct stock exchange floats of utility-independent large offshore and onshore wind portfolios occur, recalling the days when excess capital from Western manufacturing in the 19th century was recycled into infrastructure projects on a global scale. The partial float of utilities renewables subsidiaries has not always been successful, with buybacks occurring when share prices dropped as downward regulatory and shale gas pressures emerged. What is needed is a genuinely separate quoted sector for renewables which may not be possible until something closer to grid parity is achieved so that investors are less concerned about regulatory risk. Further work is required in bond markets to ensure confidence lost by the downgrading of previous renewable issues is regained. This is likely to mean less aggressive gearing, partial recourse, and using conservative base cases with high margins of comfort. On the smaller scale, it is time for renewables to reconnect with its community roots when combined with smart grid, the potential is huge. Even now, a very high percentage of onshore wind capacity in Germany and Denmark is owned by local communities. Partly borne from the now defunct tax breaks for doctors and dentists, local ownership was the driving force that created the industry and which has been reflected in the huge take-up of rooftop solar in Germany. In the UK, there are early signs of a resurgence in community renewables and the Government has allowed a tax break to be retained for the sector provided formal community investment structures are followed. In the US, the PTC is itself a tax shelter investment and although detractors debate the cost of it to the Treasury, it is usually the case that such funds find alternative ways to avoid the exchequer. It will be instructive to see whether this resurgence, which is reflected in grass roots community schemes worldwide, builds into a movement with real economic affect. In North America the over subscription of Nova Scotias Community Feed-in Tariff (COMFIT) projects, accessible by municipalities, First Nations, cooperatives and not-for-profit groups, indicates that there is considerable latent demand to be tapped. The possibility is that utility-scale renewable projects may in time be complemented (if not overtaken) by localized renewable energy (electricity and heat) schemes coupled with smart meters, energy efficiency retro-fit, electric vehicle and demand management initiatives. This community energy virtual circle may come to fruition only if utilities and large IT players in many jurisdictions become active participators in its development even though it challenges centralized models. For example, in the Isle of Wight (UK), IBM Toshiba, SSE, Cable and Wireless and Silver Spring Networks have engaged through a community interest company, Eco Island, to deliver a smart energy network. In Austin, Texas, the Pecan Street project is using stimulus funding and the municipal-owned utility to pioneer smart grid techniques in the US. The Japan smart community alliances level of ambition is indicated by a number of domestic demonstration projects, together with international initiatives. Japans new energy and industrial technology organisation (NEDO) is building a smart grid on Hawaiis Maui island, and a project in New Mexico.

Renewable energy country attractiveness indices February 2012 Issue 32

Post Durban: can community renewables and smart grid brighten a low-margin decade? (contd)
The challenge will be to achieve genuine local community participation in both smart grid and renewables in such a way as to avoid the concerns recently expressed by the UK Parliaments Public Accounts Committee that poorly executed smart metering programs could increase costs for the fuel poor. There is a big prize to aim for: democratizing renewable energy through more local ownership will mean that consumers become producers. This offers the prospect that local businesses (large and small), hospitals and schools, as well as the domestic sector, enter into arrangements whereby their power and heat is sourced locally (e.g., from waste to energy schemes, biomass boilers, PV panels and if suitable wind and hydro). Such schemes also allow energy efficiency retro-fits to occur if facilitated by innovative schemes such as the Green Deal in the UK which is to use utility bills as the means to collect payments rather than adding loans to mortgages (as occurred with the criticized US PACE scheme). These community schemes build an indigenous low carbon capital base, providing for genuine local involvement and jobs rather than the disbursement of funds to external providers through conventional remote energy production. They also have the advantage of rebuilding political influence for the sector that could lose popular support if increasingly strident stand-offs between industry groups and regulators in many Western jurisdictions get out of hand. New businesses are emerging to provide these services both locally and at scale and, from the politicians standpoint the good news is that associated jobs are less easily exported. As always, one of the challenges is funding and changing regulatory practices designed for a more centralized system. It is suggested that legislators cheerfully look to tax breaks to encourage investment. In this way, the rate of build-out is controlled by the extent of participation. This is not to say that FIT or other support measures can be wholly dismantled, but because such projects tend to consume electricity at the point of generation, they do bring forward the time at which grid parity is reached due to investment decisions being at the retail rather than wholesale price of electricity. In New York State, legislation has been passed allowing remote net metering for farm-based and non-residential customers generating electricity from solar, wind and farm-based biogas systems. This means that power produced at one location can be offset against bills on properties under the same ownership in another location if within the same utility zone, subject to output limits. If remote net metering were applied to large-scale renewable plants transmitting renewable electricity across national grids, the energy market could be transformed. Generators could sell direct to customers paying only for transmission and balancing, with customers able to claim carbon offset in the US (by surrendering the REC, but not the PTC). However, this is not a viable option at present in the UK, for example, where the ROC certificates would have to be surrendered to avoid Carbon Reduction Commitment (CRC) obligations and thus tax arguably a restriction that should be removed as such surrender is uneconomic, being the equivalent of the PTC and REC combined. Removing bureaucratic obstacles to such policies would also allow high-energy users dependent on fossil fuel plants, to remotely source renewable energy at more cost-effective rates potentially preserving jobs and facilitating the transition to a low carbon economy by Western economies. One particularly interesting finance mechanism is the tax-exempt mutual bond, which has long been used in the US. Under this arrangement, qualifying community entities are able to raise funds by way of bonds to investors that may only have recourse to project income streams, and receive tax-free interest or, more recently, on the basis that the issuer reclaims a tax credit based on a proportion of that interest cost. The advantage of such schemes is that support is confined to the tax revenue foregone on interest rather than being a tax credit on the whole capital cost or a straight cash grant. It is therefore a relatively cheap source of finance if issue costs are kept low: but as a nudge mechanism, it is dependent on local initiative for take-up.

Renewable energy country attractiveness indices February 2012 Issue 32

Post Durban: can community renewables and smart grid brighten a low-margin decade? (contd)
In the US green stimulus package, over US$3.2b (2.5b) of qualifying energy conservation bonds (QECBs) and US$2.4b (1.9b) of clean renewable energy bonds (CREBs) were allocated. In the case of QECBs as of November 2011, 85 projects totaling over US$545m (421m) had been funded in 21 states leading to some commentators expressing disappointment at the low rate of take-up. (See figure 1 and figure 2 below for the total volume and apportionment of the funds by sector) Data for CREBs is less publicly available for comment and both programs remain open. QECBs are a nudge mechanism and reasons for there being a low take-up could include municipality borrowing limits, the costs of issue associated with small projects, or lack of investor appetite in current economic circumstances. In states with a strong association with renewables, such as California, take-up to date has exceeded 60%. The volume and diversity of projects funded is interesting. One of the challenges for this type of scheme in other jurisdictions will be to keep costs down and to ensure that procedures are simplified. The use of tax-exempt bonds could well complement initiatives (such as the Green Investment Bank and climate bonds), allowing localism to influence the volume of projects put forward. This should also allow investor appetite to regulate the take-up without affecting public sector borrowing requirements if recourse is solely to projects. But what of the developing poor? At the Durban climate change conference in December, negotiators launched the Green Climate Fund, announced at COP15 in Copenhagen, which aims to channel US$100b (77b) of finance to developing nations to help mitigate and adapt against the worst impacts of climate change. However, the finer details of the fund, such as sources of funds, host country, trustees and existing balance, are still to be agreed. It would be good if, in todays strained circumstances, more room could be created for Green bonds, building on the US$7b (5b) issued to date by the World Bank, EIB and other issuers, largely taken up by Swedish and Japanese investors. Unfortunately, in the current economic circumstances, the rate of issue of World Bank bonds has slowed considerably. Would it be too much to ask (as a practical measure) that all those who attended Durban agree post event to treat income received by their citizens or corporates from World Bank green bonds meeting standards such as those in the Climate Bond initiative to be tax exempt? This could become an active platform to raise funds to invest in projects to benefit the developing poor a global nudge mechanism to complement the Durban fund.

Figure 1: Total volume of QECBs funding

200 180 160 140 Issued Amt ($m) 120 100 80 60 40 20 0 School improvements Capital improvements Facilities retrot Solar improvements Community loan program Energy efciency Renewable generation Others Water

Figure 2: Proportion of QECBs funding by sector

Community loan program 2% University projects 3% Water 5% Solar improvements 6%

Energy improvements 2% Solar and wind 24%

Facilities retrot 7%

Others 7%

Energy efciency 13%

School improvements 10% Renewable generation 10% Capital improvements 11%

Source: EPC

Source: EPC

Renewable energy country attractiveness indices February 2012 Issue 32

Regional focus Middle East and North Africa

The Middle East and North Africa (MENA) regions renewable energy promises great potential. The region has an abundance of solar resources together with some wind resources, and these are expected to attract a significant amount of investment once political stability is restored. Many countries in the region are seeking to increase the proportion of renewable energy in their generation mix as they seek to reduce local consumption of fossil fuels, meet everincreasing local demand, and even start to diversify their economies away from hydrocarbons. Despite reasonable progress, a healthy project pipeline and significant partnerships, such as the DESERTEC and Medgrid initiative, the region suffers from the lack of international investment, and currently an apparent lack of willingness by policy setters to implement the necessary support. A short overview of each countrys current renewable energy status within the MENA region has been prepared to outline the future opportunities in an area where the renewable energy sector has only just begun to scratch the surface.

Despite being one of the first countries in the region to develop large onshore wind farms, Egypt remains a relatively new market with significant amount of potential and ambitious targets. Egypt is seeking to derive 20% of its energy from renewable sources by 2020 mostly through wind (12%) and hydro and solar PV (8%). Further to this, there are several studies being conducted to assess the feasibility of connecting the Egyptian grid to the European grid. Electricity sector reform, a modern grid infrastructure, proposed FITs and a renewable energy fund would lay a significant foundation for further growth in the renewable energy sector. Progress has been made with a new electricity law developed by the Ministry of Electricity and Energy designed to reflect the ongoing market reform as well as to strengthen the local regulatory agency. It also includes articles supporting renewable technologies, through encouraging private investments. In order to encourage investments in renewable energy, a competitive FIT process has been outlined. The Gulf of Suez, with high and stable wind speeds, is regarded as one of the best wind energy areas in the world. In 2001, the feasibility of the area was confirmed with the construction of a 305MW wind farm. By the end of 2010, 550MW was operational, with the tendering process for a further 250MW in the Gulf of Suez expected to commence this year. The Government has further committed to future wind projects with 7GW of capacity targeted through large land allocations and access to the World Bank US$5.2b (4b) Clean Technology Fund. Apart from a 30MW CSP hybrid plant at Kuraymat (coupled with gas), there are no major immediate plans for more CSP. However, there are future indications of at least two 100MW solar plants to exploit Egypts vast solar potential. Due to the topography in Egypt, it has substantial hydropower resource, which is utilized by both large-and small-scale developments. The country has a strong portfolio of small-scale hydro facilities and an impressive pipeline of projects planned or under construction.

With deregulation and privatization of the electricity market at the turn of the century and a FIT incentive for renewable energy drafted shortly after, Algerias legislative framework for the renewable energy sector is one of the more progressive in the MENA region. However, delays in implementation have stunted the growth of renewable energys proportion of the countrys energy supply. Algeria remains committed to its ambitious targets of 20% of energy supply from renewable energy sources (RES) by 2030. It has publicly stated that it will be investing US$120b (93b) into renewable energy projects. Wind energy potential is relatively low, yet several small-scale wind projects with capacities of 10MW to 20MW are planned to be constructed over the next three years, mostly near the northern coastline. It is solar where the greatest potential lies as Algeria has an abundance of the resource. The Government has announced a 500MW capacity target as part of its power expansion plans. This has already recently crystallized in the commencement of operations for the Hassi Rmel hybrid plant (with 25MW CSP). Also there are plans for three more sites by 2014, totaling 250MW.

Renewable energy is largely driven by energy security concerns as the country seeks to diversify away from reliance on coal and gas. Internal bureaucratic hurdles and grid infrastructure have previously hindered significant development of renewable energy available through excellent natural solar resources. Although solar tariffs have recently been reduced for small to medium-sized projects, the regulatory framework remains supportive. Utilities remain obliged to purchase the energy generated from renewable sources and solar plants greater than 12MW are now eligible to receive subsidies.

Renewable energy country attractiveness indices February 2012 Issue 32

Regional focus Middle East and North Africa (contd)

It is estimated that 60MW of solar PV and wind are to be constructed in 2012. As solar technology costs continue to reduce, Israel has approved a 240MW CSP plant, which is expected to become operational in 2014. Wind resources are not as attractive as in other countries, yet a seven-year FIT has been proposed to support wind projects. Further supporting wind power, the Government recently fast-tracked a 155MW farm that is expected to be completed mid 2013. At the end of 2010, Morocco had 286MW of operational wind energy with 720MW under construction and a further planned procurement of 1GW estimated at 2.5b. Furthermore in 2009, the Government launched a 6.4b solar plan to develop and construct 2GW by 2020. As part of this, there are plans to invest in CSP across five sites. The first of these (Ouarzazate) is expected to be operational by 2015 and will be the largest solar plant in the world, at 500MW.

Similar to Morocco below, Jordan is a net energy importer with limited oil and gas reserves. As a result, the Jordanian Government outlined a commitment to develop and construct 600MW of solar and 600MW of wind over the next decade. In mid 2011, the Government invited companies to submit proposals for renewable energy generation projects to meet the Governments renewable energy target of 1.8GW by 2020. Sixty-five proposals were received, and the Government is currently reviewing and determining the investment incentive mechanism that it will implement to support the development and construction of these projects. The Kingdom is set to receive bids for the countrys first wind farm this year the planned Fujeij project, a 90MW wind farm in the southern region. 2012 and 2013 will be defining years for Jordan as the Fujeij wind project and Shams Maan solar project (of approximately 100MW) are expected to be completed.

In the MENA region, Oman has been the pioneer of liberalizing electricity markets, implementing regulatory reform and privatization in the mid 1990s. Oman also benefits from a well established Public Private Partnership (PPP) regime through which significant international investment has been deployed. The countrys approach to renewable energy has not been as zealous, with limited Government initiatives and support. Onshore wind development is limited due to permitting availability and grid restrictions, yet small projects have been approved and are under construction with the potential to increase wind capacity to 750MW. Solar resource in Oman is one of the highest in the world with the potential to supply all of Omans current energy demand. CSP is touted as the technology to take advantage of this resource with demonstration projects currently planned (1050MW) and larger facilities (c. 200MW) possible in the future.

Without any domestic coal or oil reserves and energy demand expected to double by 2020, Morocco is actively seeking alternatives to meet its current and future energy needs. A target to generate 42% of electricity from RES by 2020 demonstrates the necessity and commitment to diversify their energy supply. Despite no FIT or subsidies, the Moroccan Government has privatized the energy sector, which has encouraged private and foreign investment in renewable energy. Further reforms are planned with the breakup of the former monopoly enjoyed by the state utility, Office National de lElectricite (ONE). The Governments EnergiPro initiative encourages industrial entities to invest in renewable energy projects less than 50MW to meet their own energy needs, with guaranteed access to the grid and incentive tariffs for any excess electricity produced. Despite these initiatives and some private investment incentives, the Government is opposed to a wider FIT, which has limited the amount of renewable energy capacity to be constructed. Being the only country connected to the European grid, Morocco has a great opportunity to transform itself from a net energy importer to a net energy exporter. Moroccos excellent solar and significant wind resources support the case for the country to become an energy provider to Europe. Desertec Industrial Initiative (Dii) is currently developing the first solar Reference Project of 150MW in Morocco, which is expected to include exporting energy to Europe through Spain.

Saudi Arabia
With the largest oil reserves in the world, some would question the necessity of renewable energy for Saudi Arabia. However, the economic case for renewable is predicated on extending the life of its oil fields and therefore export earnings, at the same time as meeting rapidly increasing power demand. During 2011, Saudi Arabia announced a US$100b (77b) spending commitment across nuclear and renewable energy aimed at achieving their target of 10% by 2020. King Abdullah City for Atomic and Renewable Energy (KACARE) is part of this initiative. The centralized state-owned utility will provide the required stability and support to the pioneering renewable energy projects. As part of introducing a new law for renewable energy, the Government is planning to adopt a solar energy FIT similar to what has been seen across Europe. The sector is still rather immature as no comprehensive technical or economic feasibility studies have been performed. An added deterrent is that the regulatory and permitting process is yet to be fully developed and implemented creating further uncertainty for any immediate investment and development. However, the country has exceptionally strong solar resources, and has installed its first major PV plant (500kW) in Farasan. There are also attractive wind resources along the Arabian Gulf and Red Sea coastal areas.

Renewable energy country attractiveness indices February 2012 Issue 32

Regional focus Middle East and North Africa (contd)

Despite political instability, the Tunisian authorities are focusing on promoting investments in the renewable energy sector. The Government has ambitious targets, although there is currently no FIT or renewable energy certificate incentive scheme in place. Tax incentives and subsidies are used to encourage development and construction. Investment and expansion are required to develop and increase the grid to meet solar and wind targets. Interconnections with Algeria, Libya and other European countries will be required and are currently being planned. Various legislative, regulatory and financial barriers hinder the development of Tunisias attractive wind potential. Current energy output from wind farms is around 114MW and total potential is estimated to be around 1GW. The existing capacity is set to increase, with the 190MW Bizerte Wind Power Plant anticipated to be operational in 2013. Currently, there are no CSP plants operational in the country yet Nur Energie has recently announced ambitious plans to construct a CSP tower portfolio totaling 2GW. The first of the projects is expected to be commissioned in 201213. Renewable energy development is anticipated to increase even further with the 2b PPP Government-backed Tunisian Solar Plan launched in 2009. Similar to other countries with high solar radiation, CSP is favored over the cheaper but more heat-sensitive PV. Masdar Power, again leading renewable energy development, is currently constructing a 100MW CSP facility, Shams 1, in Abu Dhabi. Significant progress has been made by another leading Emirate, Dubai, where the Supreme Council, its top energy policy body, has pledged funding to renewable energy development with the remainder to be financed by PPP. Currently Dubai produces 4.5MW of energy through solar plants but it is targeting to meet 1% of its energy requirements through solar technologies by 2020, and to arrive at 5% by the end of the following decade. A major initiative to contribute to this target is the Dubai Electricity & Water Authority project to build the Persian Gulfs largest solar park for c. US$3.27b (2.5b). The Sheikh Mohammed bin Rashid Al Maktoum Solar Park is expected to be roughly 1,000MW and completed by 2030.

International participation and investment is paramount to ensuring that the regions ambitions materialize. Outside of external financial market conditions, the level of participation will be dictated by the Governments adoption of appropriate incentive structures, procurement programs and regulatory support. The region can learn from international experience as policy evolves. Examples of successful programs around the world recently include South Africas renewable energy procurement program, Romanias revised green certificate scheme and Ukraines green tariff law. The various geographic, economic, and political dynamics specific to each country in the MENA region have defined the respective approach to targets and regulatory development of renewable energy. With great ambitions, an abundance of natural resources and maturing renewable technologies, the region is ideally placed to experience significant growth in renewable energy.

United Arab Emirates

The UAE has entered the renewable energy scene later than some others, but has arrived without leaving anyone questioning its commitment. Abu Dhabi alone has committed US$15b (12b) to meet its modest target of 7% by 2020. In spectacular fashion, Abu Dhabi has also committed to planning and constructing the US$22b (17b) Masdar City which will rely on renewable energy to be a zero carbon and zero waste community. This significant commitment and the countrys tax-free status are countered by a high level of bureaucracy in the permitting and regulatory environment. Recognizing the administrative inefficiencies, and with an aim to be a leader in renewable energy in the region, the UAE is presently reviewing and determining multiple incentive structures to encourage investment. Already, Masdar Power has made an initial commitment to UAEs wind potential with the construction of a 30MW wind project, in addition to part ownership of the planned 1GW London Array, the largest offshore wind farm in the world.

Ben Warren Tel: +44 (0)20 7951 6024 Email: Grant Brennan Tel: +44 (0)20 7951 5642 Email:


Renewable energy country attractiveness indices February 2012 Issue 32

Liquidity constraints set to hamper project finance deals in 2012

Given the recent closings by Ernst & Young of the 170m project financing of the Sleaford (UK) biomass plant and four Offshore Transmission Owner (OFTO) assets in 2011, clients have been quick to request updates as to the state of the banking market and the direction in which it is heading. With teams working on the close of five further OFTO assets, Norfolk Waste PFI and Essex Waste PFI, the current and future states of the banking market are also foremost in our mind. In this article we explore the margins, swap rates and availability of debt in a rapidly changing market. At the same time, yields on gilts have been low and London Inter-bank Offered Rate (LIBOR) swaps have fallen substantially in favor of borrowers, with the reduction in mid-to long-term rates over the last five years at nearly 3%.
LIBOR swap rates
rate (%) 7 6 5 4 3 2 1 0 2008 2009 7Y 2010 12Y 2011 2012

Double dip, second peak banking margins from 2005

With the threat of another double-dip recession in the UK and stagnation in European growth, we note that there has been real upward pressure on margins recently with echoes of the previous financial crisis. During the credit crunch, average margins across energy and waste for 20092010 were around 350 basis points (bps), well above rates between 20052008 which were in the region of 125bps. 2011 Q13 data indicates a marked fall from the highs of 200910. We feel that, while there was market softening in early 2011, the softening in margins are partly influenced by the lower-risk profile deals closing in this period. More recent data from our current transactions suggests that margin pressure has built up in Q4 and is likely to manifest in higher margins for closes during 2012.
Project finance margins UK Renewables and Waste
bps 450 400 350 300 250 200 150 100 50 0 200506 200708 200910 Max of Blend 2011 Q13 2011 Q4 2012

Source: Bloomberg New Energy Finance (2012)

Steady as she goes all-in rate estimates

With the downward movement in swaps outweighing the increase in margins, the all-in rate has fallen over the past few years keeping the demand for debt financing of projects high. Based on the blended margins and swaps shown, the all-in rates fell from 7% to historic lows of approximately 5% by the end of 2011.
All in rate UK Renewables & Waste
% 9 8 7 6 5 4 3 2 1 0 Year 2008 2009 2010 2011

Source: Ernst & Young analysis (12 year LIBOR swap, blend of margins)

Min of Blend

Average of Blend

Behind this apparent lower cost of debt lies some more fundamental debt structuring issues. The reawakening of the mini-perms, increases in cash sweep mechanisms and decreasing tenors of debt are all a part of the current financing landscape. This is quite a set-back from the beginning of 2011 when the re-emergence of the underwriting and syndication markets were expected.

Source: Ernst & Young analysis

Future increasing margins could be seen as adversely impacting the viability of nonor limited recourse project finance as a financing solution. However, base rates have been at rock-bottom in Europe for the last three years, with expectations that these will remain low for at least another three years, with a similar story in the United States.

Renewable energy country attractiveness indices February 2012 Issue 32


Liquidity constraints set to hamper project finance deals in 2012 (contd)

Basel what? increasing costs of bank lending
Many clients looking to raise finance in 2012 have asked the question of whether banks are taking the opportunity offered by falling swap rates to increase margins as they know that these can be afforded by projects. Although a plausible possibility, a closer look suggests that this is not the case. The perfect storm of Basel III, banking downgrades and Eurozone instability have increased the underlying cost to banks of lending, especially long term. Recent ratings downgrades of various banks reflect the risks now priced into the banking sector, particularly those exposed to the riskier end of European Government debt. Basel III requires banks to hold more equity and capital, increasing the cost of long-term loans and therefore limiting the volume available and increasing the pricing of longer term debt. The recent Unicredit discounted rights issue and resultant short-term share price falls also increase the perceived risk of fresh equity raise. As a way of complying with regulation, this is therefore likely now to be a less attractive option to banks than reducing the long-term loan book. With Basel III to be fully implemented by 2019, we feel it is likely that there will be further impacts on costs of bank funding from this legislation over the next few years and therefore additional increases in margins and reduced availability of long-term bank debt.
EU Renewables and Waste projects total debt issued
$b 30 25 20 15 10 5 0








Source: Bloomberg New Energy Finance (2012)

Lessons from the previous crunch suggest that the rationing of debt will result in only the strongest projects and sponsors able to source debt. Even with this in place the debt will be high margin, restrictive on equity and be short tenor or with punitive long-term margins to force refinancing.

Keep calm and carry on? an open question on financing

Long-term project finance is currently still available and, despite margin increases, is still affordable due to falling swap rates. There remain a number of funders still active on deals across the environmental infrastructure sector, however the sheer volume of capital required, and the continued tightening of liquidity both in the project finance market, but also in the case of many utility and other sponsor companies, points to an increasing need for new sources of capital. The deep pools of capital in the structured finance market and institutional equity markets appear an obvious solution, however evidence suggests it will take some time for institutional equity to find its way into the right deals under the appropriate structures and for the structured debt market to get comfortable with regulatory and sovereign risk.

Is the cupboard bare? Debt availability in the market

With affordability appearing not to be an insurmountable issue, we expect this key issue of availability of debt to be really felt by the market in 2012. Total debt issued in European renewable and waste transactions peaked at close to US$25b (19b) in 2008 and fell dramatically in 2009 to around half of the 2008 issuance. Although volume increases have been seen year on year to 2011, our recent experience in the funding market at the end of last year and the beginning of 2012 suggests that the value of deals closed will fall in this year coupled with shorter tenors and higher margins.

Andrew Perkins Tel: +44 (0) 117 981 2051 Email: Tom Fletcher Tel: +44 (0) 20 7951 8315 Email:
12 Renewable energy country attractiveness indices February 2012 Issue 32

M&A and IPO activity

The M&A sector saw a relatively active quarter with signs that the solar market is starting to mature with a number of acquisitions of secondary assets. However, the ongoing European debt crisis has made it an uneasy quarter for M&A activity in many countries. and construction (EPC) contractor. The 50MW plant, which uses parabolic trough technology, is based in Torre de Miguel Sesmero, Badajoz. MidAmerican Energy had an active quarter as it also acquired the 550MW Topaz solar power plant from project developer First Solar Inc. First Solar has agreed to construct, operate and maintain the US$2b (1.5b) plant, located in California. The project is set to become operational in early 2015. The company also acquired a 49% equity stake in NRG Energys 290MW Agua Calienete project based in Arizona. The first 30MW of the US$1.8b (1.4b) project are set to become operational in early 2012, with the remaining balance due for completion in 2014. The Luxembourg-based Marguerite Fund acquired 36MW of EDF Energies Nouvelles 115MW solar PV project based in Toul-Rosires in France. The EIB backed Marguerite Fund was created in 2010 to make equity investments in major energy and transport projects across the EU in order to help reach the EUs 2020 renewable energy targets. In December 2011, TransCanada Corp., one of the biggest oil and gas pipeline companies in the world, acquired nine solar PV projects across Ontario from Canadian Solar Inc., with a combined capacity of 86MW. TransCanada estimates that the US$470m (363m) portfolio will come into service between late 2012 and mid2013. All nine projects have signed a power purchase agreement (PPA) with the Ontario Power Authority. The acquisition will add to TransCandas existing portfolio of wind, coal and nuclear power plants.

The development of Indias renewable energy sector continued last quarter when Hyderabad-based Suryachakra Power signed JV agreements with biopharma company American Bio Sources Inc. (ABS) and Environmental Energy Finance Corporation USA (EEFC) to develop 500MW of renewables in the country. ABS and EEFC will contribute US$200m (154m) of funding from EXIM Bank of USA. The equity for the JV will be distributed equally between Suryachakra Power and ABS/EEFC.

Enbridge Inc., Canadas largest pipeline operator, acquired a 50% stake in the Lac Alfred wind project based in Quebec, owned by EDF Energies Nouvelles. Enbridge will pay nearly US$1.2b (0.9b) for the stake in the 300MW project. MidAmerican Energy Holdings Co., the project developer owned by Warren Buffett, acquired three wind farms at the development stage in Iowa that will have a combined generating capacity of 404MW. The acquisition includes the 103MW Vienna wind farm from RPM Access, and the 200MW Eclipse and 101MW Morning Light wind projects from Clipper Windpower. The projects are expected to be completed by the end of 2012 and will increase MidAmericans wind generation capacity to 2.2GW. Once the farms start generation, the company will have spent US$4b (3b) on developing wind projects in Iowa. Marubeni Corporation, the Japanese trading company, has entered into an agreement with DONG Energy to purchase a 49.9% stake in DONGs 172MW Gunfleet Sands offshore wind farm in the UK. The transaction, which was completed on 1 November 2011, is believed to be for a cash consideration of around 200m (239m). The acquisition increases Marubenis global renewables portfolio to 450MW.

It has been a quiet quarter in the public markets as global economic constraints have unsettled equities markets, with the three largest IPOs occurring in China. In December, Beijing Jingnen Clean Energy Co., a clean energy unit of the Beijing municipal Government raised HK$1.9b (0.2b) in an initial public offering (IPO) through the issue of 1.14b shares at HK$1.67 (0.17) per share. In January, Guodian Technology & Environment Group Co. Ltd., a Beijing-based environmental protection technology and engineering company, raised HK$2.6b (0.3b) via an IPO on the Hong Kong Stock Exchange. Guodian issued 2.34b shares at HK$2.16 (0.21) per share. At the end of 2011, Sungrow Power Supply Co. Ltd., the solar inverter manufacturer, achieved a successful IPO on the Shenzhen stock exchange, raising CNY1,336m (162m). Sungrow issued 44.8m shares at CNY30.5 (3.7) per share.

In November 2011, NRG Energy Inc., the global solar power plant operator, acquired San Francisco-based solar project developer Solar Power Partners. The acquisition will add 30MW of distributed solar projects in operation or under construction to its portfolio. NRG will also secure development rights from Solar Power Partners project pipeline across the US and Puerto Rico, which includes assets on hospitals, universities, schools, airports and municipal buildings. General Electric Co. and the German fund KGAL GmbH & Co. KG invested 111.1m for a 93% stake in a Spanish solar thermal plant operated by Actividades de Construccion Servicios SA, Spains second-largest solar power engineering, procurement

This is a sample of the main global M&A and IPO transactions in the renewables sector over the past quarter. Sources: All information relating to M&A activity in the sector is obtained from publicly available sources.
Renewable energy country attractiveness indices February 2012 Issue 32 13

All renewables index at February 2012

Rank1 1 2 3 4 5 6 7 8 9 10 11 11 13 14 14 16 16 16 19 19 21 21 21 24 24 26 27 27 27 30 30 32 33 34 34 34 37 38 39 40 (1) (2) (3) (4) (6) (5) (7) (8) (10) (10) (12) (9) (13) (13) (15) (15) (15) (23) (15) (19) (19) (21) (21) (23) (23) (26) (27) (27) (27) (30) (30) (32) (33) (34) (34) (34) (37) (39) (38) (40) Country China USA3 Germany India UK Italy France Canada Sweden Brazil Australia Spain Romania Poland South Korea Japan Belgium South Africa Ireland Denmark Portugal Netherlands Greece Mexico Norway Finland New Zealand Egypt Taiwan Morocco Turkey Ukraine Austria4 Tunisia Bulgaria Argentina Israel Chile Hungary4 Czech4 All renewables 70 68 66 63 59 57 56 54 50 49 48 48 47 46 46 45 45 45 44 44 43 43 43 42 42 41 40 40 40 39 39 38 36 34 34 34 33 32 31 30 Wind index 76 67 70 64 66 58 58 61 54 51 47 47 52 52 48 46 51 47 52 48 45 49 44 43 48 45 46 41 43 38 41 37 32 35 35 35 31 34 31 31 Onshore wind 79 71 67 71 61 61 59 67 55 56 51 51 56 56 46 48 49 52 52 44 48 49 48 45 48 48 49 45 45 42 43 41 40 38 39 40 37 38 38 38 Offshore wind 69 57 80 43 80 50 55 46 53 40 37 36 39 41 53 39 58 36 50 58 34 49 33 39 46 39 36 32 38 26 32 27 0 27 24 22 14 23 0 0 Solar index 61 74 51 65 34 57 49 33 31 42 53 55 33 30 44 52 30 43 22 29 44 30 46 42 21 20 22 41 32 49 37 33 36 45 31 31 44 30 26 26 Solar PV 66 74 70 69 48 63 56 46 42 46 53 53 45 42 50 61 42 41 30 40 47 42 51 43 29 28 31 39 44 47 40 46 50 44 42 36 46 34 37 36 Solar CSP 46 75 0 54 0 42 29 0 0 32 54 60 0 0 29 27 0 50 0 0 36 0 33 40 0 0 0 45 0 54 28 0 0 48 0 17 38 19 0 0 Biomass/ other 58 63 67 60 58 53 57 50 56 51 42 43 44 42 41 38 38 37 43 45 39 36 34 38 45 52 34 35 35 36 34 43 48 19 33 31 25 27 41 30 Geothermal 51 69 58 45 36 62 34 36 35 23 57 27 41 22 36 46 27 34 23 33 25 21 25 54 30 26 51 25 38 21 41 32 33 27 34 27 28 36 39 23 Infrastructure2 74 65 74 67 66 58 56 65 55 49 46 38 46 47 43 52 50 48 48 52 38 41 32 38 51 47 46 34 43 42 37 41 50 41 39 34 38 39 37 46

Source: Ernst & Young analysis

Notes: 1. Ranking in Issue 31 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 standard (RPS) and favorable renewable energy regimes. 4. Technology weightings have been adjusted for landlocked countries to reflect the lack of offshore potential.

China maintains its position atop the All renewables index for another quarter; however, there are signs that the rapid growth of its renewables industry is slowing. Alongside several large utility-scale developments, including construction of the nations largest solar plant at 200MW in Qinghai province, excess supply in the worlds largest producer of solar PV cells has led to a decline in numbers of cell manufacturers, as firms struggle to source what was once relatively cheap finance from US investors.

As the 12th Five-Year Plan (FYP) comes into force, Chinas renewable energy targets are to be met through a focus on hydropower to bring cost savings and emission reductions to the superpower. The US remains in second place, increasing its score by two points to take it to 68 points in the All renewables index. In his State of the Union address on 23 January 2012, President Obama confirmed his support for renewables, stating that he will not walk away


Renewable energy country attractiveness indices February 2012 Issue 32

All renewables index at February 2012 (contd)

from the promise of clean energy. A commitment to allow 10GW of renewable energy to be placed on publically-owned land in 2012 goes someway to embedding clean energy in the national conscience, while it waits to be seen whether there will be an extension to the PTC at the end of 2012. The rise in score for the US assumes the PTC will be extended. In coming months, if that becomes more unlikely, the US will fall several points due to the large impact it will have on the US wind sector. In Germany, on 28 December 2012, the Government development bank KfW launched its Action Plan Energy-Turnaround that aims to provide 50% of external loans to support a range of renewable projects. Meanwhile, further support was provided to the sector through the new Renewable Energy Law, passed on 1 January 2012, which allows renewable energy producers to market power directly to consumers. This allows the producer to claim two market premiums instead of the usual FIT: the first payment covering the difference between the FIT and the monthly ex-post average price at the energy exchange, and the second payment being a management fee compensating costs of selling the power, including listing fees and forecasting errors. As a result, Germany has gained a point in the All renewables index. India remains static in fourth place with a score of 63 in the All renewables index as the Government announced plans to avoid the costly solar FITs (that have hindered Europe recently) by moving to an auction system for developers. Further, large strides continue to be made in the Indian solar industry as 400MW were connected to the grid in the current fiscal year, albeit two-thirds less than originally planned. In the UK, several large offshore wind projects are in the pipeline, including the worlds largest wind farm planned in Scotland. At 1,500MW, the 4.5b project would deliver the same amount of power as the average coal power plant. A 300MW plant in Kent will receive a seven-year 150m (179m) loan from the EIB, while in the bioenergy industry a 120m (143m) 53MW wood-fueled biomass plant in the county of Middlesex has received the go-ahead from the Government. As a result, the UK has climbed a place into fifth position. A number of European states felt the repercussions of continued economic uncertainty across the Eurozone as Standard & Poors downgraded the sovereign credit ratings of Italy, France, Spain, Portugal and Austria this quarter by one point each. Also in the past quarter, Hungary has been downgraded to junk status by Fitch, Moodys and S&P. In addition to the above, Spanish attractiveness for renewable energy investment diminished significantly and it drops out of the top 10 for the first time, following news on 27 January 2012 that the Government is putting in place a temporary suspension on renewable energy premiums paid to new-build plants, including wind, solar PV, solar CSP, biomass and hydro technologies. Sweden replaces Spain as it moves up to ninth place, built on the foundations of a strong economy, with several large wind power developments in the quarter, including the first phase of construction of a 200MW farm in Jadraas, in the southeast of the country. As South Korea continues to pursue its bold ambition to become fifth in the world for attractiveness of renewable energy investment, our ranking sees them climb one place to 14th, as the Government announces an initial aim for all utilities to have 2% of their energy production from RES this year. In South Africa, the competitive bidding process (that replaces the FIT scheme for renewables) witnessed a successful first round of tenders with ZAR26b (2b) of investment for 28 projects totaling 1.4GW of renewable energy capacity. As a result, South Africa jumps up seven ranks to 16th place this quarter, increasing by three points in the All renewables index. Ireland fell one point in the All renewables index, as the Government announced plans to remove FIT subsidies for offshore wind power, as economic austerity measures tighten. Portugal fell two places in the All renewables index as the Government removed licenses for new renewables projects. This was part of the conditions of the IMF bailout, which requires Portugal to review the efficiency of renewables support mechanisms. In addition, there was a considerable reduction in FITs for micro-and mini-generation projects. Mexico moves up one place to 24th as one of the largest solar plants in Latin America received financial approval. The 396MW plant is set to be built in the wind-rich area of La Ventosa in Oaxaca state. Moroccos strong potential for solar thermal electricity generation is reinforced by the planned construction of a 500MW solar CSP plant. The Ouarzazate CSP plant project is set to receive US$200m (154m) in financing from the International Bank for Reconstruction and Development and a further US$97m (75m) from the Clean Technology Fund. Israels Public Utility Authority announced plans for a 22% reduction in solar power FITs as it compensates for the global decline in the price of solar panels.

Renewable energy country attractiveness indices February 2012 Issue 32


Wind indices at February 2012

Rank1 1 3 3 4 5 6 7 7 9 10 10 10 13 13 15 16 16 16 19 19 19 22 22 24 24 26 27 27 29 29 31 32 33 33 33 36 37 38 38 38 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (10) (12) (13) (13) (15) (16) (16) (16) (19) (19) (21) (21) (23) (23) (25) (25) (27) (28) (29) (29) (31) (32) (33) (33) (33) (36) (37) (38) (38) (38) Country China Germany USA2 UK India Canada Italy France Sweden Poland Ireland Romania Brazil Belgium Netherlands Denmark South Korea Norway South Africa Australia Spain New Zealand Japan Finland Portugal Greece Taiwan Mexico Egypt Turkey Morocco Ukraine Tunisia Argentina Bulgaria Chile Austria Israel Czech Hungary Wind Index 76 70 67 66 64 61 58 58 54 52 52 52 51 51 49 48 48 48 47 47 47 46 46 45 45 44 43 43 41 41 38 37 35 35 35 34 32 31 31 31 Onshore wind 79 67 71 61 71 67 61 59 55 56 52 56 56 49 49 44 46 48 52 51 51 49 48 48 48 48 45 45 45 43 42 41 38 40 39 38 40 37 38 38 Offshore wind 69 80 57 80 43 46 50 55 53 41 50 39 40 58 49 58 53 46 36 37 36 36 39 39 34 33 38 39 32 32 26 27 27 22 24 23 0 14 0 0

The US increases one point overall due to a higher level of confidence in continuation of the PTC for wind energy following President Obamas State of the Union speech. Readily accessible financing has seen a number of new projects declared in the quarter, including a US$320m (247) loan to construct a 189MW farm in Montana. Canada remains in sixth place with an increase of one point in the wind index as CA$707m (535m) of financing was secured from KWF bank for a 272MW plant set to become operational in 2013. The top 10 has remained relatively unchanged except for Brazil, which has fallen to 13th place as a result of the Congressional Commission on Mines and Energy state department rejecting a bill to force electricity distributors to purchase energy generated from wind farms, requiring a minimum of 250MW a year to be contracted by each supplier. This was despite the state-owned Brazilian Development Bank (BNDES) approving US$985m (761m) of funding for a 629MW project in Rio Grande do Norte state in the east of the country. Ireland fell one place as the Governments recent plans to introduce a FIT for offshore wind were scrapped in January 2012, as these were deemed too expensive for consumers. In Romania, the private wind energy company Monsson Group began construction on its 150MW wind park worth US$317m (245m). This has nudged the East European country four places up the rankings to 10th place alongside Poland and Ireland. The South Korean Governments commitment to clean electricity, with a planned US$31b (24b) of investment in renewable energy including a 2.5GW increase in offshore wind by 2020, has resulted in a jump to 16th place in the indices, overtaking Spain, whose recent termination of all renewable energy premiums for new builds is likely to unsettle investors in the country further. South Africa moves into joint 19th place as the first round of a US$12b (9b) renewable energy program gets under way (see country focus article for further information). Around half of the bids in the first tender round were for wind projects. In the lower half of the wind index, Portugal drops three places to 24th, as the Government suspended the awarding of licenses for new generation capacity. The Government cited the need to review the regulatory framework for electricity produced under the FIT special regime.

Source: Ernst & Young analysis

Notes: 1. Ranking in Issue 31 is shown in brackets. 2. This indicates US states with RPS and favorable renewable energy regimes.

China retains a comfortable hold at the top of the wind index with 20GW of installed capacity in 2011 and 100GW planned by 2015. However, further development is likely to be curtailed at a lower growth rate. About 30% of wind plants are unconnected to the grid: a problem that the state aims to tackle through the West-East Electricity Transfer Project, connecting three large 20GW transmission lines by 2020.


Renewable energy country attractiveness indices February 2012 Issue 32

Solar indices at February 2012

Rank1 1 2 3 4 5 6 7 8 9 9 11 12 13 13 13 16 17 17 19 20 21 22 23 23 23 26 27 27 27 30 30 30 30 34 35 35 37 37 39 40 (1) (2) (3) (4) (4) (6) (7) (7) (9) (9) (11) (12) (12) (12) (15) (16) (16) (16) (19) (20) (21) (22) (23) (23) (25) (26) (26) (28) (28) (28) (28) (28) (28) (34) (35) (35) (37) (37) (39) (40) Country USA India China Italy Spain Australia Japan Germany Morocco France Greece Tunisia Portugal South Korea Israel South Africa Brazil Mexico Egypt Turkey Austria UK Ukraine Canada Romania Taiwan Argentina Bulgaria Sweden Netherlands Poland Belgium Chile Denmark Czech Hungary New Zealand Ireland Norway Finland Solar index 74 65 61 57 55 53 52 51 49 49 46 45 44 44 44 43 42 42 41 37 36 34 33 33 33 32 31 31 31 30 30 30 30 29 26 26 22 22 21 20 Solar PV 74 69 66 63 53 53 61 70 47 56 51 44 47 50 46 41 46 43 39 40 50 48 46 46 45 44 36 42 42 42 42 42 34 40 36 36 31 30 29 28 Solar CSP 75 54 46 42 60 54 27 0 54 29 33 48 36 29 38 50 32 40 45 28 0 0 0 0 0 0 17 0 0 0 0 0 19 0 0 0 0 0 0 0

A second utility-scale plant of 300MW to be built on public land in Arizona also received approval from the US Department of Interior. India remains in second position, achieving a one point increase due to the Indian giant Moser Baer announcing US$1b (0.8b) of expansion plans in its solar subsidiary over the next nine months to set up a 300MW plant. In Rajasthan state, Indias largest by area, the local Government agency opened up bids for 200MW of capacity split equally between solar PV and solar CSP as it aims for 550MW of grid-connected solar by 2013. Cheap solar appears to be the expectation for the future, with prices likely to fall 40% to around INR7 (0.1) per kWh by around 2015, down from INR12 (0.2) at present. China remains in third place in the table as oversupply in the international solar export market has driven down the value of its previously high-growth industry. However, several large-scale plants have been commissioned, including the 200MW Geermu project, and a 50MW plant in central Ningxia, bringing the relatively small provinces total solar capacity to 103MW. Italy moves up to fourth place despite a drop in its sovereign credit rating to BBB+, while Spain fell three points in the solar index as the Government announced a temporary cessation in renewable electricity premiums paid on any new-build plant. Morocco retains ninth place, increasing two points in its solar CSP score as the World Bank approved US$297m (229m) of financing for a 500MW solar CSP plant to be constructed South East of Marrakesh, as the North African nation strives for 2GW of installed solar by 2020. France moves to joint ninth place as Solairedirect SA, a South African subsidiary of the largest power distributor in France Solaire direct, agreed its first PPA with Soregies, a local French utility, to provide an offtake contract for 60MW of solar parks over 30 years. Portugal moves down to 13th as cuts in FITs are accelerated from the planned 20/MWh to a tariff rate reduction rate of 54/MWh. Both South Korea and South Africas continued renewable energy ambitions sees them placed 13th and 16th respectively, as the latter plans around 1.9GW of solar parks to 2016 through its independent power producer program. Argentina has risen two places in the index to 27th, as Shanghaibased Sky Solar Holdings set aside US$70m (54m) to build a solar project in the western province of San Juan, which is actively looking to attract inward investments in solar.

Source: Ernst & Young analysis

Notes: 1. Ranking in Issue 31 is shown in brackets. 2. This indicates US states with RPS and favorable renewable energy regimes.

The US reinforces its hold on top of the solar index, increasing a further two points as several new installations were developed in the quarter, including a US$1b (0.8b) 300MW solar plant in Boulder City, Nevada. Korea Midland Power Co. and Posco Engineering Co. won the auction for the project and will be responsible for the construction and operations, with the plant set to start generation in December 2014. The US is expected to remain one of the worlds largest solar markets through to 2013, as cheap solar panels coupled with strong Government quotas for use of the renewable energy source encourage market growth.

Renewable energy country attractiveness indices February 2012 Issue 32


Country focus China

China launch their own subsidy investigation
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 1 1 3 Issue 31 1 1 3

Onshore wind
Following on the heels of the investigation into anti-competitive solar exports, on 19 January 2012, the US Department of Commerce announced a further enquiry into US$100m (77m) of cheap wind farm towers exported from China and Vietnam. The Wind Tower Trade Coalition, a group of US manufacturers, claims that Chinas wind towers were being sold at prices that severely undercut US prices by almost 214%. The dispute threatens to escalate tensions further in the clean energy sector between the worlds two largest markets. The International Trade Commission (ITC), a separate US Government agency, will vote in mid-February 2012 to decide on whether the US market has been materially impacted by the claims. If this is upheld, Chinese wind tower producers believe potential anti-dumping levies could seriously harm a rapidly developing industry in China. According to China s 2050 Wind Energy Development Roadmap, recently issued by the energy research institute of NDRC, Chinas focus will remain on onshore development until 2021. By 2050, the state plans to have 1TW of installed wind capacity at a cost of US$200b (154b), making up 17% of electricity consumption compared with just 1.5% of total generation today.

According to news from the National Energy Administration (NEA), Chinas 12th Five-Year Plan (FYP) has finalized new targets for renewable energy. This sees a change in Chinas power generation structure, with new and renewable energy sources appearing more prominent. According to the plan, renewable energy generation should account for 11.4% of total primary energy consumption by 2015, increasing to 20% by 2020. To meet the plans clean energy goals, hydropower will play a crucial role, contributing considerably to energy generation and emissions reductions over the next 10 years. 13GW of biomass is planned by 2015, requiring roughly 700 new plants to come online. In the core wind and solar sectors however, competitive tensions with the US continue to loom, as outlined below.

The wrangling between the US and China over anti-competitive subsidies continued at the end of 2011 when the Chinese Ministry of Commerce announced it would launch its own investigation into subsidies provided to renewables by several US states, including Washington and California. The investigation is expected to be completed by May 2012. The Chinese solar market, the driver of increased global competition and lower module prices over the past two years, is starting to fear declines of its own. The National Development and Reform Commissions (NDRC), Energy Research Institute has admitted that Chinese manufacturers need to reduce output as demand fails to keep pace with the growth in production capacity. The announcement comes as 300 solar PV manufacturers out of 728 in the country have halved output or shut down entirely. This oversupply, coupled with reduced European demand, has seen a dramatic fall in prices for polysilicon, which makes up a quarter of the cost of solar panel materials, falling 62% in 2011 to edge near to the cost of production. As a result, the Government has stopped the promotion of the commodity for export to foreign investors to slow down the decline in prices. In addition, Chinese solar cell manufacturers, previously funded by US investors, face increased borrowing costs through selling bonds in Shanghai, as the risk of collapse deters investors. Completion of Chinas largest solar plant, at 200MW in the western province of Qinghai, has bolstered the Governments elevated aim to generate 15GW of solar by 2015 to soak up some of the excess supply. However, there is a long way to go as Chinas domestic solar market capacity in 2011 stood at 2GW.
18 Renewable energy country attractiveness indices February 2012 Issue 32

Offshore wind
China has been exploring the possibility of abandoning the use of public auctions to set a standard price for offshore wind projects. As an alternative, the Government is considering allowing several large state-owned companies to plan their projects through negotiations with local Governments and authorities, such as the State Oceanic Administration. China has made substantial progress in boosting its burgeoning offshore wind market through the connection to the grid of its largest intertidal wind farm. On 28 December 2011, Longyuan Power, Chinas largest wind power developer, connected the 99MW project in the eastern province of Jiangsu.

Ivan Tong Tel: +86 10 5815 3373 Email: Paul Go Tel: +86 10 5815 3688 Email:

Country focus US
Obama supports the extension of tax equity
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 2 3 1 Issue 31 2 3 1

Onshore wind
Matching the trend evident in Q3 2011, onshore wind projects saw record investment as developers scrambled to finalize projects by the years end in order to take advantage of the expiring 1603 Grant. Although final capacity numbers are inconclusive, Greentech Media suggests that 2011 installations could top 7GW. However, this boom is likely to be short-lived, as the PTC, wind powers key incentive, is set to expire at year-end 2012. Despite President Obama reiterating support for the credits, there is still uncertainty given the upcoming federal elections. Despite the potentially expiring incentives, there is still liquidity in the financing market with JPMorgan Chase providing US$131m (101m) in tax equity to NextEra Energy Inc. for three Californian wind farms. NextEra Energy also raised US$234m (181m) in financing for projects in Oklahoma and California with variable rates on a December 2029 loan maturity. The San Franciscobased developer, NaturEner USA LLC has raised a US$320m (247m) construction loan from Morgan Stanley for a 189MW wind farm in Montana.

Re-launch of State Attractiveness Indices

Ernst & Youngs Tax Credit & Incentives Advisory Services (TCIAS) will release the latest edition of its biannual United States Renewable Energy Attractiveness Indices in February. The report ranks renewable energy markets in the individual US states, comparing suitability for investment in various renewable technologies.

Tax equity is set to reclaim a pivotal role in renewables finance with the expiration of the American Recovery and Reinvestment Act (ARRA) Section 1603 Grant program in December 2011. With the conclusion of the Grant, developers have to resort to tax equity to monetize the established IRC Sections 45 and PTCs and investment tax credits (ITCs) to entice outside project equity. However, demand for tax equity may outstrip the traditional supply provided by established tax equity investors. Greentech Media, a dedicated clean technology media outlet, estimates demand for US$7b (5b) of tax equity compared with an estimated supply of approximately US$3.4b (2.6b) from current investors. This supply/demand imbalance could result in increasing tax equity yields making development more challenging. In his State of the Union address, President Obama reiterated his support for the credits, which are widely expected to be renewed despite the national elections in November.

The solar industry forged ahead in the US in 2011 with the addition of over 1GW of capacity for the first time in the history of the industry, with utility scale projects leading the way. California solidified its dominant position as the premier state for solar with the addition of over 500MW during the course of the year, while New Mexico added over 60MW in Q3 alone. New Jersey made substantial leaps in rooftop installations in 2011, although there are indications that the flooded Solar Renewable Energy Credit (SREC) market, as a result of the cash grant program, will continue to depress prices (which have already fallen over 60% since 2010), limiting prospects for the near-term future. Korea Midland Power Co., a Korean renewables developer and Posco Engineering Co., the steel manufacturer, won an auction to build and operate a US$1b (0.8b) solar project in Boulder City, Nevada. The 300MW project is scheduled to be completed by December 2014 and is part of a wider strategic play by Korean companies as they seek investment opportunities globally following declining domestic demand.

Other changes
2011 concluded with President Obamas signing of the National Defense Authorization Act for Fiscal Year 2012. The Act contained a provision exempting recipients of the 1603 Grant from normalizing the cash grants benefits, as is required in the treatment of the ITC. Normalization accounting rules obligate regulated utilities to apply the ITC benefits evenly across the life of a project when calculating the rate that they can charge for electricity. Exempt from this provision, Independent Power Producers (IPPs) and unregulated utilities recognize the ITC immediately, providing them with a competitive advantage.

SAIC Inc. and Carlyle Group LP, an asset management firm, are providing US$225m (174m) in financing to Enova Energy Group for the construction of the Plainfield biomass plant in Connecticut. The project is expected to be completed by the end of 2013 and will export the power to Northeast Utilities Connecticut Light & Power unit under a 15year PPA.

Michael Bernier Tel: +1 617 585 0322 Email: Jay Spencer Tel: +1 617 585 1882 Email:
Renewable energy country attractiveness indices February 2012 Issue 32 19

Country focus Germany

A new Renewable Energy Law with aggressive targets
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 3 2 8 Issue 31 3 2 7

Onshore wind
Power generation from onshore wind farms climbed to a record in December 2011, helping achieve a 20% share of renewables in the overall power mix. The increase in output creates further pressure to improve the transmission infrastructure to help smooth the distribution of renewables on the grid.

Solar PV
Despite a reduction in the FIT last year, installations of solar power boomed in December as developers sought to finalize projects before the next round of tariff cuts on 1 January. Between 2GW and 3GW of capacity were installed during December taking the total installed capacity for 2011 to around 7GW, just short of the record set in 2010. Solar power producers will receive between 0.179 and 0.244 for each kilowatt hour (kWh) fed into the grid, depending on the size and location of the PV system. However, as a result of the high number of installations, a proposal backed by the Economy Minister to limit the total number of installations and introduce a one-off 35% subsidy cut was rejected at the end of January due to the lack of unanimous backing. Developers are expected to rush to install projects before the next scheduled 15% reduction in July.

On 1 January 2012, the latest version of the German Renewable Energy Law (EEG) was enacted. The 2012 EEG sets a requirement of not less than 35% of total electricity supply to be generated from RES by 2020, not less than 50% by 2030, 65% by 2040 and 80% by 2050. Rather than reducing its commitment to expanding renewable energy, Germany has committed to a more aggressive target than in the previous law. Some key provisions of the 2012 EEG include: Raising biomass tariffs nearly 30% from 0.11/kWh to 0.14/kWh for plants less than 150kW in size. Increasing geothermal tariffs more than 50% from 0.16/kWh for small projects to 0.25/kWh for large projects. Increasing offshore wind tariffs by 15% from 0.13/kWh to 0.15/kWh. Increasing the "starter" bonus (received for 8 or 12 years if developed by 2018) for offshore wind by 25% from 0.15/kWh to 0.19/kWh. Maintaining the 2011 degression for solar PV into 2012. Maintaining the tariffs for wind energy on land, including the repowering bonus that provides an uplift for replacing turbines that are more than 10 years old with new turbines, if the project doubles in rated capacity.

Offshore wind
In a letter to the Government, TenneT TSO Gmbh, the operator in charge of the offshore grid connections in the North Sea, complained that offshore grid connections are no longer feasible within the expected time schedule. TenneT blamed a lack of personnel, material and financial resources for the delays. The news comes after TenneT confirmed to the utility, RWE, that the grid connection for its 1b Nordsee Ost wind farm would be delayed for a year. RWE is currently seeking a reimbursement for losses linked to delays. As a result, TenneT appealed to the Government to start a broad discussion about the necessary amendments to the legal framework and the processes of connection with all offshore partners and the Federal Network Agency (the German grid regulator). Germanys first commercial offshore wind farm in the Baltic Sea, EnBW Baltic 1, has secured long-term financing from a banking syndicate including the original lender, the EIB. The syndicate have provided a total amount of debt of 138m, including the 80m provided by the EIB in March 2011. According to the EIB, the project provides a strong signal for the further development of the German offshore wind sector.

Renewables increasingly pose a challenge for the German grid, with the total installed capacity of onshore wind and solar PV currently standing at nearly 50GW compared with a baseload power demand of 30GW. This problem is accentuated by the ambition within Germany to develop 25GW of offshore wind farms by 2030. At the end of 2012, TenneT TSO Gmbh, one of Germanys four transmission grid operators, complained to the Government about the lack of resources for expanding the grid.

Frank Matzen Tel: +49 6196 9962 5259 Email: Robert Seiter Tel: +49 3025 4712 1415 Email:
20 Renewable energy country attractiveness indices February 2012 Issue 32

Country focus UK
Small victory for solar PV
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 5 4 22 Issue 31 6 4 22

On 21 December 2011, the High Court ruled that the Government was unlawful in announcing that solar FIT rates would be cut from 12 December 2011, 11 days before the consultation was due to end. On 4 January 2012, DECC appealed to the High Court against the decision, stating that a ruling was premature because ministers were still undecided on the tariff cuts. On 25 January, the UK Court of Appeal rejected Department of Energy and Climate Changes (DECCs) appeal, ruling that it did not have the power to enact premature cuts before the end of a consultation with the industry. As a result, solar FIT rates will be cut from 3 March 2012, not 12 December 2011. Following on from its Court of Appeal rejection, the Government has announced two further consultations over its small FIT, which make it clear that it intends to control expenditures going forward within its existing spending framework. Despite the rate cuts over the past year, it was announced that 762MW of solar PV capacity was installed last year as developers raced to complete installations before the tariffs were cut. Two German solar power developers received a total of 36m (43m) in project finance loans from BayernLB Holdings AG for two UK solar plants. The projects, consisting of a 4.99MW installation developed by Kronos Solar GmbH on the Isle of Wight and a 4.84MW plant built by Vogt Solar GmbH in Kent, were both connected to the grid before the announced tariff cuts.

Following the announcement of the UK Governments consultation on Renewables Obligation (RO) banding levels in October 2011, the Scottish Government is set to reshape their subsidies for renewable energy. Wave and tidal energy will receive an increase in ROCs as the Scottish Government recognizes the huge potential they offer in meeting Scotlands 2020 renewable and carbon reduction targets. The announcements coincide with the creation of a task force to help propel the country toward its goal of generating 100% electricity from renewable energy.

Onshore wind
Pennant Walters, the renewables development arm of the mining company Walters Group, and InfraRed Capital Partners have reached financial close on a 35MW wind farm to be built in the Ogwr Valley, south Wales. Nordex will provide the turbines and the Operations and Maintenance (O&M) contract, while Statkraft Markets will provide a long-term PPA for the entire output of the project. Lloyds Banking Group Plc acted as sole lead arranger with support from the EIB UK onshore wind intermediated scheme.

Under the Scottish Governments ROC banding review, efficient biomass projects will earn 1.5ROCs, while there will be a 0.5ROC uplift until 2015 for those that also produce heat. Banco Santander SA has acquired a 50% stake in Nevis Power, from Carron Energy Ltd. Nevis Power is developing a 190m (227m) 47MW biomass plant in South Wales. The project has been awarded planning and will work with Santander to finalize the financing.

Offshore wind
As businesses in Scotland called for the country to announce 2012 as the year of wind power, support for offshore wind looks set to remain as the Government seeks to exploit the wealth of resources at its disposal. Projects will continue to receive 2ROCs/MWh for the tax year 201415, reducing to 1.9 the following year, and 1.8 thereafter. There was more good news for the Scottish offshore wind industry, as it was announced that the worlds largest wind farm is set to be built more than 13 miles off Caithness, with a 4.5b (5.4b) investment. Moray Offshore Renewables Ltd., the developer behind the proposal, is set to submit a planning application in July for the 1,500MW project. Vattenfall, the Swedish utility, has received confirmation from the EIB that it will lend 150m (179m) for its Thanet wind farm, situated c.12 km off the coast of Kent. Despite the worlds largest wind farm being fully financed, Vatenfalls group treasurer, Johan Gyllenhoff welcomed the sevenyear loan, stating that it provided alternative financing to the bond markets. According to RenewableUK, the trade association, the supply chain will have to keep pace in order to meet the demand for the planned developments, otherwise the industry will struggle to fulfil new orders in four years' time. Yearly growth in UK offshore wind farms is expected to double between 2015 and 2016 with annual offshore wind deployment set to exceed 2.5GW in 2016. To ensure the increased output can connect to the grid, Iberdrola has committed to invest 2.6b (3.1b) in upgrading the UK electricity grid through its Scottish Power subsidiary, doubling its export capacity to 7GW by 2021.

Wave and tidal

Scottish tidal energy projects will be given 5ROCs/MWh from 2013, an increase of 2ROCs. The Scottish First Minister, Alex Salmond, provided further good news to the industry by announcing that, the Government will create an 18m (21m) fund to help develop Scotlands first commercial wave and tidal power projects. The fund is a tranche of the 35m (42m) set aside by the Scottish Government and its enterprise agencies to exploit the development of these abundant resources over the next three years. Scottish and Southern Electric, the Scottish utility, has partnered with Frances Alstom SA to develop a 200MW wave power plant off the Orkney Isles. SSE won exclusive development rights for the project and will develop 10MW before scaling up to full capacity.

Ben Warren Tel: +44 (0)20 7951 6024 Email: Steven Lang Tel: +44 (0)20 7951 4795 Email:
Renewable energy country attractiveness indices February 2012 Issue 32 21

Country focus France

Solar shows signs of maturity with first PPA
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 7 7 9 Issue 31 7 8 9

Offshore wind
The offshore wind industry continues apace in France as a consortium led by GDF Suez, EDF EN and Iberdrola submitted bids in mid January for the 3GW offshore wind tender. The results will be awarded in May, subsequent to which the successful bidders will have 18 months to finalize due diligence and confirm that the project is still feasible on the terms submitted in the bid. If there is any deviation from the terms, the bidders will be entitled to abandon the project. The bids will require a total financing commitment of 10b and will form part of the Governments ambition to develop 6GW by 2020. Areva SA, part of the Iberdrola bid consortium, has highlighted the ongoing difficulty in securing debt for the projects as larger lending consortiums are required as banks face liquidity constraints.

On 1 January 2012, the French Ministry of Energy facilitated the development of smaller-scale renewables by deeming plants under a specific capacity as fully licensed to operate. The capacity limit varies by technology (12MW for solar, biogas, biomass, geothermal and plants recycling household waste; and 30MW for onshore wind power plants), and means that installations under these capacities are no longer required to apply for an operations license, but will still need to declare to the Ministry that they have started generating power. Electricite de France SA (EDF), the French utility, has warned that the price at which it sells power to end consumers could increase by as much as 30% by 2016, partly due to the increased cost of subsidizing renewable energy. Indeed, energy prices could become a focal point in the upcoming election as the Government faces mounting pressure to keep energy costs down for the end consumer.

Suppliers in the wood industry are concerned that some areas of France may face supply shortages as a result of the burgeoning demand for biomass power. As a result, the suppliers have asked the Government to reassess the state policy and financial support for biomass to reduce the demand and protect the timber industry. Operators in the wood industry are concerned about the difference in pricing terms offered between wood used for industrial purposes and that used for biomass power, which can reach twice as much per tonne.

After a mixed year for the European solar industry, the French market showed signs of maturity at the end of 2011, as the French solar power producer, Solairedirect SA and the regional Government of Poitou-Charentes signed Frances first PPA for solar energy with Soregies, a local utility. Solairedirect and the council will form a JV, with Solairedirect owning 35% of the shareholding, to develop 60MW of capacity and sell the power over a 30year PPA contract. The 180m project will invest in utility scale projects with prices as low as 108/MWh. Solairedirect, alongside Ampere Equity Fund, also obtained a 115m project finance loan for three French solar PV plants to refinance an equity bridge used to construct the plants totaling 34MW in capacity. The debt was provided by three European banks comprising Natixis, Rabobank International and the lending arm of Siemens AG, Siemens Bank. The increase in lending margins as a result of the Eurozone debt crisis were countered by relatively low interest rates, providing competitive funding terms for the project. As liquidity constraints put pressure on sources of finance for renewables, bilateral and multilateral finance agencies are increasingly providing funding for projects. This was evidenced at the start of 2012 when an equity fund, backed by the EIB and Germanys KfW, acquired 36MW of a 115MW owned by EDF. The Marguerite fund secured project financing from BNP Paribas and Crdit Agricole for the project which, when constructed, will be the largest in France. The Luxembourg-based Marguerite fund is aiming to raise a total of 1.5b from institutional investors to deploy to other renewables assets as part of a drive to help meet the EUs 2020 renewable energy targets.

Jean-Christophe Sabourin Tel: +331 5561 1855 Email: Alexis Gazzo Tel: +331 4693 6398 Email:


Renewable energy country attractiveness indices February 2012 Issue 32

Country focus Canada

Renewables buoyed by Ontario election result
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 8 6 23 Issue 31 8 6 25

Onshore wind
The development of wind power projects in Quebec surged over the past quarter with Kruger Energy securing construction financing for their 101MW Montrgie development project that is expected to be commissioned in December 2012. Boralex Inc., the renewable independent power producer (IPP), and utility, Gaz Mtro, secured a CAN$725m (549m) non-recourse project finance loan for the first stage of its 366MW Seigneurie de Beaup wind project. The 272MW initial stage, which was financed by KFW Group, the German state-owned development bank, will consist of 126 turbines and will become operational in 2013. TransCanada Corp. completed construction of the 58.5MW Montagne Seche wind farm and the first 100MW of the Gros-Morne project in Quebec as it seeks to become the leading energy infrastructure company in North America. The Gros-Morne project is part of the wider Cartier Wind Energy Project being developed by TransCanada in various locations throughout Quebec. All the power will be sold to Hydro-Quebec under a 20year PPA.

This issue saw renewable energy survive a key test in North America, with Ontarios provincial election in November. Ontarios renewable energy policies were a key political battleground, with the main opposition party promising to revoke supporting legislation for renewable energy. However, in a positive step for the industry, the incumbent Liberal party retained leadership and were just one seat short of a majority Government. The news comes as the total investment in renewable energy in Ontario surpassed CAN$20b (15b) at the end of 2011, while the province continues to provide strong support for the industry through programs such as the Ontario Emerging Technologies Fund and the Ontario Power Authority Technology Development Fund. In December 2011, Ontarios Ministry of Energy announced its scheduled two-year review of Ontarios FIT program. The review of the two-year old program will examine program rules and pricing and was recognized among the renewables industry to ensure a long-term and sustainable future. Announcements and any updates are expected in Q1 2012. In Nova Scotia, Energy Minister Charlie Parker announced the first approved COMFIT projects. Accessible by municipalities, First Nations, cooperatives and not-for-profit groups, over 12 community groups submitted 88 proposals to the province as it seeks to generate 25% of electricity from renewables by 2015 and 40% by 2020. Successful applicants were:
Proponent Colchester-Cumberland Wind Field Watts Wind Energy Northumberland Wind Field Municipality of the District of Chester Funday Tidal Technology Onshore wind Onshore wind Onshore wind Onshore wind Tidal flow MW 0.1 4.0 0.1 2.3 2.0

Recurrent Energy, a San Francisco-based solar project developer owned by Sharp Corp., received a four-year CA$250m (189m) revolving credit facility from Mizuho Financial Group Inc. to fund the construction of 20 solar PV projects in Ontario. The projects will be developed under the provinces FIT program and will include up to 200MW of capacity.

Wave and tidal

The province of British Columbia has awarded Carnegie Wave Energy Ltd., a producer of wave power technology, a grant of CAN$2m (1.5m) from its Clean Energy Fund to build a 5MW demonstration project off the west coast of Vancouver island. The company, which also has backing from Electricite de France SA (EDF), is planning to use its CETO wave energy technology for the project. The project is part of a wider ambition by Canada to install 75MW of marine energy by 2016, 250MW by 2020 and 2GW by 2030.

Applicants will need to secure financing, develop a grid impact study and complete federal and environmental impact assessments for the projects. Nova Scotias Department of Energy (DoE) has stopped accepting new COMFIT applications due to high demand and the market is eagerly awaiting the recommencement of project applications.

Mark Porter Tel: +141 6943 2108 Email: Cynthia Orr Tel: +160 4643 5430 Email:
Renewable energy country attractiveness indices February 2012 Issue 32 23

Country focus South Africa

Positive outcome for first renewables tender
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 16 19 16 Issue 31 23 25 16

Onshore wind
634MW of wind energy from eight projects were selected under the IPP program. Of these, Sumitomo Corp. was chosen as the preferred bidder for the 100MW Dorper wind farm in the Eastern Cape. The venture will cost a total of JPY20b (0.2b) and is scheduled to be completed in mid 2014.

In November, international climate change negotiators met in Durban for the 17th Conference of the Parties (COP) to the Kyoto Protocol. After the last round of talks in Cancun failed to summon the global cohesion required to agree measures to avert climate change, this meeting was billed by many as critical to decide upon an extension to the Kyoto Protocol. After two weeks of stalled discussions, an agreement was reached that commits countries to negotiate a new legally binding treaty by 2015. The agreement, known as the Durban platform for enhanced action, will come into force from 2020. During the talks, the South African DoE announced the results of its first renewable energy IPP program capacity tender. The tender, which placed an emphasis on local socioeconomic benefits as well as value for money for the economy, selected 28 preferred bidders out of 53 bids submitted for a total of 1,416MW. Developers are required to reach financial close by June this year and be operational by 2014, with state utility, Eskom, providing a guaranteed 20-year PPA for each of the projects. Rob Winchester, Ernst & Young LLP Lead Partner advising the DoE, commented on the success of the first round of tenders stating that the program is integral for the Government to meets its objectives of rapidly increasing energy supply while ensuring sustainable economic development to meet the demands of increasing economic growth in the country. The DOE is holding five rounds of tenders to procure 3,725MW by 2013 as it seeks to generate 8% of electricity from renewables by 2030. The next tender round is scheduled for April this year. South African bank, Standard Bank Group Ltd. provided more than ZAR8.2b (0.8b) out of ZAR26b (2.5b) to the projects, representing 43% of the total capacity, with Nedbank providing ZAR6b (0.6b) for wind and solar projects. The Government has also created the South African Renewable Initiative, which will work with the EIB to raise international finance for the next round of projects to ensure there is enough liquidity, given the volume of projects that have been underwritten by the South African banks. Investment bank, Investec Ltd. and the EIB have agreed to establish a 100m funding facility in South Africa to promote the development of clean energy. It will fund commercially proven technologies such as wind, solar, gas and biofuels. There will be a ceiling of ZAR500m (48m) for the loans, which will receive varying interest rates depending on the risk profile of the technology used in the project.

Solar PV
Solar PV accounted for 631.5MW of the total contracts awarded under the IPP program across 18 projects. There has been significant interest from international equity houses looking to take equity stakes in the projects with additional funds looking to the next round of tenders in April. NextEnergy Capital, a London-based investor in clean energy, is aiming to create a 400m private equity fund for renewable energy and environmental project investments in Africa and has started the fund-raising process for 18m to develop a pilot solar PV project. The fund, called ix:Africa plans to invest approximately 80% of the equity in permitted power generation and infrastructure projects, with the remaining 20% aimed at developing pre-consented sites and preparing early-stage technology for the market.

Solar CSP
Abengoa, the Spanish energy group responsible for the majority of global CSP installed capacity, was awarded the first two solar thermal contracts under the IPP program with a combined total of 150MW. The company will build the 50MW tower technology Khi Solar One plant, and the 100MW parabolic through technology KaXu Solar One plant between the second half of 2012 and the start of 2014, at an estimated cost of 1b. The plants will be located in the Northern Cape province. Soitec SA, a French maker of semiconductor products for the electronics and energy industries, was also selected as a preferred bidder by the DoE under the IPP program to develop a 50MW concentrated photovoltaic (CPV) plant in the Western Cape. Soitec will supply its own technology for the project with Schneider Electric providing the EPC in addition to the O&M contract.

Norman Ndaba Tel: +271 1772 3294 Email: Rob Winchester Tel: +44 (0)20 7951 3227 Email:


Renewable energy country attractiveness indices February 2012 Issue 32

Country focus Portugal

Support fades for renewables on resurgent debt fears
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 21 24 13 Issue 31 19 21 12

It has been a turbulent quarter in the Portuguese renewable energy industry. In the aftermath of the EU/EC/IMF bailout in Portugal and the worsening economic and financial health in the country, the Portuguese Government slashed FITs at the end of 2011 for new installations of renewable micro and mini-generation systems. The Ministry of Economy and Employment announced the cuts in two ministerial decrees: No. 284/2011 (micro-generation). and No. 285/2011 (mini-generation). As a result, the reference tariff for micro-generation in 2012 will be reduced from the planned 360/MWh to 326/MWh, while the reference tariff for mini-generation will be cut from 250/MWh to 215/MWh. The reference FIT for micro-generation was originally set at 400/MWh for the first eight years and 240/MWh for the subsequent seven years and was to be reduced annually by 20/MWh. The new decrees accelerate the tariff rate reduction rate from 20/MWh to 54/MWh per year (in the first eight years of implementation) and 35/MWh per year (in the subsequent seven years), starting from 2012. There was good news for the industry in mid-December as the Portuguese Regulatory Entity for Energy Services (ERSE) announced that the first auction for 300MW of renewable energy had been successful. The auction, known as the first PRE release auction, after the special regime where renewables are produced with predefined tariffs, was seven times oversubscribed with 11 participants submitting bids with a total capacity of 9.4GW. The average price achieved in the auction was 53.12/MWh. Energias de Portugal, the Portugese utility, is obliged to purchase the electricity generated by the winning bidders. However, since this zenith, the renewables industry has faced increasing pressure entering the new year as ERSE proposed an increase in electricity prices of around 30%, to become effective from 2012, to compensate for the higher production and maintenance costs driven by renewable energy. An early increase in the VAT rate on electricity and natural gas prices in 2012 from 6% to 23% brought additional pressures to the end consumer.

Furthermore, on 5 January 2012, Portugals Council of Ministers voted to suspend the awarding of licenses for new generation capacity for renewables with immediate effect. The suspension comes as the international finance community has put pressure on the Government to review the efficiency of support schemes for renewables and propose options to reduce the FIT. This is part of the conditions of Portugals 78b bailout by the IMF. The Government is also tasked with a commitment to eradicate the FIT deficit by 2020, which currently stands at 3b. The review has received negative responses from industry, especially Associao de Energias Renovveis (APREN), which has urged the Government to provide more clarity over the length of the suspension.

A consortium led by Enel Green Power Espana SL agreed a 260m loan from the EIB to fund 376MW of wind parks in Portugal. In the meantime, an innovative offshore floating wind turbine project, sponsored by EDP and Principle Power Inc., advanced to a year-long testing phase in December 2011. The Vestas turbine, located 20 miles off the Portuguese coast, is the first offshore wind turbine in open Atlantic waters, and the first deployment of a semi-submersible structure supporting a 2MW wind turbine. Over the next few weeks, a rigorous commissioning, testing and startup procedure will be completed. This will include trial operations and a phased ramp-up in power production to full capacity.

Martifer Solar, the subsidiary of the construction company Martifer SGPS, has signed an agreement with BNP Paribas Clean Energy Partners for the construction of a 22MW solar PV installation in Portugal. The plant is due to be completed by the first half of 2012 and will produce 37.4GWh/year. The news comes as solar PV manufacturers across Europe reported declining profits amid a reduction in solar demand. Martifers solar division announced in late November that its net profit for the year had fallen 48.1% to 4.7m.

Jose Gonzaga Rosa Tel: +3512 1791 2232 Email: Diogo Lucas Tel: +3512 1791 2000 Email:
Renewable energy country attractiveness indices February 2012 Issue 32 25

Country focus Greece

Solar ambitions to repay sovereign debt
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 21 26 11 Issue 31 21 25 11

investors with long-term concessions and will facilitate investments by offering fully licensed special purpose vehicles in state-owned locations with grid connection permits to reduce administrative procedures. It is likely that a large volume of the power will be exported to Germany as it seeks to move away from nuclear power. The Government will be able to use excess revenue from the project to reduce its public debt burden by as much as 15b, reduce unemployment and diversify its energy portfolio. At the start of December 2011, the Government appointed National Bank of Greece SA and US based Guggenheim Partners as financial advisors for the project. In addition Public Power Corp SA, the countrys largest electricity producer, is developing a 200MW project in northern Greece. In the past 12 years the solar sector in Greece has been supported by a FIT that pays higher rates than its European neighbors (0.35 to 0.4 per kilowatt hour (kWh) in the months to February 2012 compared with 0.21 to 0.29/kWh as witnessed in Germany. In the past, Greece had not benefited from the solar boom witnessed by its European counterparts, as bureaucratic hurdles deterred developers. However, with generous tariffs driving more rapid growth recently, and with the wider economic environment being faced by Greece, it was announced on 1st February 2012 that subsidies for solar power producers would be cut in order to ensure the viability of the financing mechanism, with FITs for installations larger than 100KW cut from programmed levels by 12.5% to 292.08/MWh from February 2012 with rates continuing to ratchet downwards every six months to reach 203.20/MWh by August 2014 (due to the recent arrival of this information, please note that this quarters attractiveness indices do not score for this development). In order to address, to some extent, the time taken to obtain the required licenses Invest in Greece, an agency that implements a law to expedite the development of projects deemed beneficial to the Greek economy, has announced that it will fast track three solar PV projects totaling 1b to stimulate economic growth.

Despite the ongoing fiscal crisis and a lack of liquidity in Greece, the development of renewable energy is still viewed as a means to revive the economy, evidenced by the increased number of projects that received production permits between the periods Q3 2010 and Q3 2011. However, despite the continued support, the availability of finance is still a major constraining factor with cautious investors seeking reduced sovereign risk, while Greek and European banks face serious liquidity constraints, rising funding costs and counterparty risk issues. EU and related (e.g., EIB) funding is therefore seen as an increasingly important funding pool. Additionally the Hellenic Transmission System Operator (HTSO), the entity that is responsible for the implementation of the FIT system currently in place, has been facing increasing financial pressures. The increasing penetration rate of solar PVs in the Greek system, combined with the low System Marginal Price (SMP) level of the Greek electricity pool during the last two years has deteriorated the financial position of HTSO. The Government supports the financial position of HTSO through a number of measures (including the proceeds from the sale of emission rights in the Athens Exchange and an increase of the special Renewable Energy Sources (RES) duty paid by all consumers amongst others) though these measures are not seen as long term solutions.

On 16 January 2012, in an attempt to support the implementation of the renewable energy law that it ratified in June 2010 further, the Government introduced Ministerial Decision 4014/2011, which aims to simplify the procedures for awarding environmental permits to renewables projects. Other structural reforms to be effected in response to the fiscal crisis (e.g., measures aiming at increasing productivity and competitiveness) could potentially enhance the attractiveness of investment in RES.

Onshore wind has been the predominant technology in helping the country meet its 2020 target of 20% of renewable energy in final energy consumption. Wind currently represents around 68% of the total installed renewables capacity with approximately 1.5GW, a 15% increase in capacity compared with the 1.3GW as of Q3 2010. In order to meet the targets of the RES 2020 plan, the Government is currently assessing the licensing of offshore wind capacity in combination with a revision of the island interconnection program.

As of Q3 2011, there were 460MW of installed solar power, representing 21% of total installed renewables capacity, compared with 200MW at the end of Q3 2010. High levels of solar irradiation make Greece an attractive solar market. To take advantage of this resource amid the evident debt crisis, the Government recently launched Project Helios, a 20b project that anticipates developing between 2GW and 10GW of power by 2050 to export to Northern European countries. The scheme is to be developed in accordance with EU Directive 2009/28/EC that allows a host country to develop renewable energy projects and export the power to support other EU Member States in meeting their 2020 renewable energy targets. Greece will provide
26 Renewable energy country attractiveness indices February 2012 Issue 32

Georgios P. Smyrnioudis Tel: +30 210 288 6461 Email: George Momferratos Tel: +30 210 288 6424 Email:

Country focus Mexico

Mexicos prospects for a clean energy transition
Ranking All renewables index Wind index Solar Index Source: Ernst & Young analysis Issue 32 24 27 17 Issue 31 23 28 16

Onshore wind
Mexicos Electric Power Research Institute has conducted studies to establish the national wind energy generation potential. These estimates are based on the assumption that only 10% of the total area is potentially viable for the installation of wind farms due to Mexicos highly variable terrain. Due to various socioeconomic factors, as well as the technical feasibility of wind generation, the wind energy potential resource for plant load factors greater than 20%, 30% and 35% is estimated at around 71GW, 11GW and 5GW respectively. While the latter are naturally the most attractive from a generation point of view, under the nuances of the Mexican electricity market, plants with load factors below 30% can be economically feasible in certain conditions. Mexico is privileged to have one of the worlds best wind resources in the south western state of Oaxacas La Ventosa region. The IDB has approved financing for the construction here of 132 turbines representing one of the largest wind farms in Latin America, at 396MW, via a US$72m (56m) loan to Marea Renovables Capital. The project will reduce annual carbon dioxide emissions by 1m tonnes and supply energy to subsidiaries of Fomento Econmico Mexicano, S.A.B. de C.V (FEMSA) and Heineken, reducing the beverage companies total energy costs by approximately 10%.

The Mexican Governments Secretara de Energa (SENER) is the department responsible for energy production and regulation, promoting the use of RES in reducing fossil fuel dependence. A recently issued Study on prospects for renewable energy development in Mexico by SENER suggests that there is between 16GW and 20GW of potential renewable energy deployment available over the next 15 years. Currently, the country is close to meeting a number of national renewable energy targets across a range of technologies including wind, hydro (<30MW), geothermal and bioenergy generation. These targets were established as part of the National Energy Strategy 201024, which aims to diversify the energy mix and increase the share of clean technologies supplying power to the grid to 35% by the year 2024. As a timely boost to the economy, Mexicos Foreign Ministry recently announced that US$158m (122m) of research grants are being provided by Germany to work in collaboration with the Latin American state on a two-year scientific training program, developing renewable energy initiatives as well as other measures to tackle climate change. Further, the Clean Technology Fund investment plan, part-funded by the Inter-American Development Bank (IDB) which supports climate-friendly development across Latin America, announced on 30 November 2011 a 20year loan of US$70m (54m) to Mexico. This will aid the construction of more than 10 small-scale hydro and wind power projects with total renewable electricity generation of around 1GW, going some way to meeting Mexicos ambitious renewable energy plans.

On 28 November 2011, the Chinese solar PV specialist Risen Energy Co. signed an agreement with the Government of the central state of Durango to build a solar plant over several phases. The initial ground-mounted phase will cost US$60m (46m), with total capacity of all planned phases at 200MW. Currently, solar PV is used for small-scale applications including water pumping and rural and residential electricity, with just 32MW of installed capacity nationwide. Mexico has no operational solar CSP plants; however, there is a project under way to develop a hybrid system consisting of a combined cycle gas turbine together with 14MW solar thermal, expected to begin operations in 2013.

Small hydro
The Federal Electricity Commission (CFE) is a company created and owned by the Mexican Government with responsibility for generating, distributing and marketing power to around 31% of the population. It operates a number of hydroelectric plants with a total capacity of 293MW.

Roberto Cuaron Tel: +5255 5283 8698 Email: David Escalante Tel: +5255 5283 8604 Email:
Renewable energy country attractiveness indices February 2012 Issue 32 27

Commentary guidance notes

Long-term index
As stated on page 1, 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. 2. 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: 1. Power offtake attractiveness (19%) this includes the price 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 stimulate renewable energy generation can exist in a variety of forms and structures. The most successful incentives and structures have been direct renewable energy tax breaks or brown energy penalties, accelerated tax depreciation on renewable energy assets and tax-efficient equity investment vehicles for individuals. Grant or soft loan availability (9%) grants can be available 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 renewable energy 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 capacity compared with 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). 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 & Youngs own market knowledge. There is significant variation between analysts views on each market and the forecasts used are a market view only the scores in no way guarantee that the forecast capacity will be built. Current installed base (8%) high installed bases demonstrate 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 solar intensity. Project size (15.5%) large projects provide economies of scale and a generally favorable planning environment, which facilitates project development financing.

Renewables infrastructure index

The 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. The access to finance parameter incorporates sovereign credit ratings and sovereign credit default swaps in conjunction with qualitative analysis. This generic renewables infrastructure index is combined with each set of technology factors to provide the individual technology indices. 3.



Technology factors
These comprise six indices providing resource-specific assessments for each country, namely: 1. 2. 3. 4. 5. 6. Onshore wind index Offshore wind index Solar PV index Solar CSP index Geothermal index Biomass and other resources index


7. 8.

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28 Renewable energy country attractiveness indices February 2012 Issue 32

Company index
Company Abengoa Actividades de Construccion Servicios SA Alstom SA American Bio Sources Inc. Areva SA Banco Santander SA BayernLB Holdings AG Beijing Jingnen Clean Energy Co. BNP Paribas, BNP Paribas Clean Energy Partners Boralex Inc. Canadian Solar Inc. Carlyle Group LP Carnegie Wave Energy Ltd. Carron Energy Ltd. Clipper Windpower Crdit Agricole DONG Energy EDF Energies Nouvelles EDP Electricite de France SA (EDF) Enbridge Inc. Enel Green Power Espana SL Energias de Portugal Enova Energy Group Guodian Technology & Environment Group Co. Ltd. Environmental Energy Finance Corporation Eskom First Solar Inc. Fomento Econmico Mexicano S.A.B. de C.V. Gaz Mtro GDF Suez General Electric Co. Guggenheim Partners Heineken Hydro-Quebec Iberdrola InfraRed Capital Partners JPMorgan Chase Korea Midland Power Co. Kronos Solar GmbH Kruger Energy Longyuan Power Marea Renovables Capital Page 24 13 21 13 22 21 21 13 22,25 23 13 19 23 21 13 22 13 13 5, 25 22, 23 13 25 25 19 13 13 24 13 27 23 22 13 26 27 23 4, 21, 22 21 19 17, 19 21 23 18 27 Company Martifer SGPS, Martifer Solar Marubeni Corporation MidAmerican Energy Holdings Co. Mizuho Financial Group Inc. Monsson Group Moray Offshore Renewables Ltd. Morgan Stanley NaturEner USA LLC NextEnergy Capital NextEra Energy Inc. Nordex NRG Energy Inc. Pennant Walters Posco Engineering Co. Principle Power Inc. Public Power Corp SA Qatar Holding Recurrent Energy Risen Energy Co. RPM Access RWE SAIC Inc. Samsung Schneider Electric Scottish and Southern Electric Sharp Corp. Siemens AG Sky Solar Holdings Soitec SA Solairedirect SA Solar Power Partners Soregies Statkraft Markets Sumitomo Corp. Sungrow Power Supply Co. Ltd Suryachakra Power TenneT TSO Gmbh TransCanada Corp. Vattenfall Vestas Wind Systems A/S Vogt Solar GmbH Walters Group Page 25 13 13 23 16 21 19 19 24 19 21 13 21 17, 19 25 26 5 23 27 13 20 19 5 24 21 23 22 17 24 17, 22 13 17, 22 21 24 13 13 20 13, 23 21 4, 25 21 21

Renewable energy country attractiveness indices February 2012 Issue 32


Abbreviation APREN ARRA AWEA b CAI CFE COMFIT COP CRC CREB CSP DECC DoE EIB EEFC EPC ERSE EU EUA FIT FYP GW IMF IPO IPPs ITC Definition Associao de Energias Renovveis American Recovery and Reinvestment Act American Wind Energy Association Billion Country attractiveness indices Federal Electricity Commission Community Feed-in Tariff Conference of the Parties Carbon Reduction Commitment Clean renewable energy bonds Concentrated solar power Department of Energy and Climate Change Department of Energy European Investment Bank Environmental Energy Finance Corporation Engineering, procurement and construction Regulatory Entity for Energy Services European Union European Union Association Feed-in tariff Five Year Plan Gigawatt International Monetary Fund Initial public offering Independent power producers International Trade Commission Abbreviation ITCs JV KACARE kW/kWh LIBOR m M&A MENA mmBtu MW/MWh NDRC NEA O&M PPA PPP PTCs PV QECB REC RES RO ROC SENER SREC t TCIAS Definition Investment tax credits Joint venture King Abdullah City for Atomic and Renewable Energy Kilowatt/Kilowatt hour London Inter-bank Offered Rate Million Mergers and acquisitions Middle East and North Africa Million metric British thermal units Megawatt/Megawatt hour National Development and Reform Commission National Energy Administration Operations and maintenance Power Purchase Agreement Publicprivate partnership Production Tax Credits Photovoltaic Qualifying energy conservation bond Renewables Energy Certificates Renewable energy sources Renewables Obligation Renewables Obligation Certificate Secretara de Energa Solar Renewable Energy Credit Trillion Tax Credit & Incentives Advisory Services


Renewable energy country attractiveness indices February 2012 Issue 32

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Map highlighting CAI countries and their respective Issue 32 rankings

Denmark (19) Canada (8) Norway (24) Netherlands (21) Germany (3) UK (5) Ireland (19) Belgium (16) France (7) Portugal (21) Spain (11) Czech (40) Morocco (30) Italy (6) Tunisia (34) Greece (21) Egypt (27) Brazil (10) Romania (13) India Bulgaria (4) (34) Turkey Israel (37) (30) Hungary (39) Finland (26) Poland (14) Austria (33)

Sweden (9)

Ukraine (32)

South Korea (14) Japan (16) Taiwan (27) China (1)

US (2)

Mexico (24)

Chile (38) Australia (11) Argentina (34) South Africa (16) New Zealand (27)

Renewable energy country attractiveness indices February 2012 Issue 32


Global contacts
EMEIA Austria Elfriede Baumann Belgium Marc Guns Matthias Page Bulgaria Diana Nikolaeva Sonya Vanguelova Czech Republic Stepan Flieger Peter Wells Denmark Kasper Trebbien Kasper Vejgaard Christensen Egypt Shady Tarfa Finland Kari Pesonen Timo Uronen France Jean-Christophe Sabourin Alexis Gazzo Germany Frank Matzen Florian Ropohl Greece Georgios Smyrnioudis George Momferratos Hungary Ferenc Geist Istvan Havas India Sudipta Das Sanjay Chakrabarti Ireland Maurice Minogue Barry OFlynn Israel Itay Zetelny +97 2362 76176 +353 21 4805 762 +353 12211 688 +91 336615 3400 +91 224035 6650 +36 145 18798 +36 145 18701 +30 210288 6461 +30 210288 6424 +49 61969962 5259 +49 40361321 6554 +33 1 5561 1855 +33 1 4693 6398 jean.christophe.sabourin@ +35 840061 6202 +35 850436 2477 +20 22726 0260 +45 5158 2645 +45 3078 2092 +420 22533 5863 +420 225 335 254 +359 2817 7161 +359 2817 7100 +32 2774 9419 +32 2774 6146 +43 121170 1141 EMEIA Italy Roberto Giacomelli Angelo Era Morocco Khalil Benhssein Ahlam Bennani Netherlands Diederik van Rijn Norway Lars Ansteensen Poland Kamil Baj Przemyslaw Krysicki Portugal Jose Gonzaga Rosa Diogo Lucas Romania Cornelia Bumbacea Andreea Stanciu South Africa Norman Ndaba Celeste Van Der Walt Spain Victor Manuel Duran Eva Maria Abans Sweden Bjrn Gustafsson Niclas Boberg Tunisia Hichem Ben Hmida Hela Gharbi Turkey Ethem Kutucular Bulent Ozan Ukraine Victor Kovalenko +380 44 499 2019 +90 212 315 30 00 +90 212 315 30 00 +216 70 749 111 +216 70 749 111 +46 85205 9497 +46 85205 9000 +34 91572 7690 +34 93366 3805 +27 11772 3294 +27 11772 3219 +40 21402 4034 +40 21402 4120 +351 21 791 2232 +351 21 791 2000 +48 22557 8855 +48 22557 7750 +47 2400 2780 +31 88407 1000 +212 2295 7900 +212 2295 7922 +39 028066 9812 +39 066753 5769


Renewable energy country attractiveness indices February 2012 Issue 32

Global contacts (contd)

Asia Pacific Australia Jane Simpson Jomo Owusu China Ivan Tong Paul Go Japan Takashige Saito Kentaro Nakamichi New Zealand Simon Hunter South Korea Jun Hyuk Yoo Young Il Choung Taiwan Austen Tsao James Wang +886 22720 4000 +886 22720 4000 +82 2 3787 4220 +82 23787 4221 +64 9300 7082 +81 34582 6400 +81 34582 6400 +86 105815 3373 +86 105815 3688 +61 3 9288 8763 +61 2 9248 5555 Americas Argentina Enrique Grotz Pablo Decundo Brazil Luiz Carlos Passetti Luiz Campos Canada Mark Porter Chile Javier Vergara Rafael Le Saux Mexico Roberto Cuaron Rodolfo Lopez US Michael Bernier Dorian Hunt +617 585 0322 +617 585 2448 +52 555283 8698 +52 551101 6419 +56 2676 1388 +56 2676 1000 +14 16943 2108 +55 112573 3434 +55 212109 1710 +54 1145 152687 +54 1145 152684

Renewable energy country attractiveness indices February 2012 Issue 32


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Renewable energy country attractiveness indices February 2012 Issue 32

Renewable energy country attractiveness indices February 2012 Issue 32


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