Emerging Contenders For Renewables Race


BMI View: After extensive analysis of all the markets that are part of our Renewables portfolio, we have identified some key tre nds within the g lobal renewables industry . Despite some recent high-profile reductions to subsidies , w e still believe that developed markets provide the most risk-free investment options for developers, owing to the sheer size and developed nature of their markets, stable political situations and their well-established regulatory frameworks. That said, we believe emerging markets - although more risky - are likely to present the greatest opportunities to investors.

Developed States Dwarfing The Rest
Non-Hydro Renewables Capacity, By Region, 2012f

Regulatory Uncertainty Shifting Investment

A number of high profile changes to renewables regulations ha ve caused uncertainty within the global renewables segment and dampened investment in to some key markets. Alterations (usually reductions) to a number of government s ' feed-in tariff ( FiT ) programmes, primarily as a result of macroeconomic deterioration, ha ve rocked investor confidence and resulted in companies seeking investment opportunities in emerging renewables markets.

That said, our FiT database highlights that despite recent reductions to the tariffs available in developed European markets, these markets still offer the highest average tariff price of any region overall - except for the Middle East and North Africa (MENA) . However, as Israel is the only country in the MENA region to offer FiTs, we believe that the generous subsidies on offer in Israel are not comparable with t he other regions; where a considerably higher number of countries have adopted this type of subsidy programme (particularly Asia and developed Europe) .

Mixed Bag Of Incentives
Average Tariff Available and No. On Offer, By Region

Diverse Profile Of Rewards On Offer

Developed states may offer the greatest support for renewable energy developers and relatively low-risk investment business environments , but the rewards on offer in the already quite saturated markets are looking increasingly limited, most notably in terms of country specific rewards. Deteriorating macroeconomic and demographic fundamentals, along with their typically heavy exposure to imported fuel sources , make for a rather depressed regi onal score for country rewards, and one that is below all other regions .

Country Rewards Stifled In Developed States
Industry and Country Rewards By Regional Average (Score out of 100)

Leaving developed markets aside, and focusing more on opportunities in emerging markets, an interesting picture e merges . Using a number of analytical tools developed for BMI 's Renewables service , we have identified some key trends in each region:

  • Central and Eastern Europe: The regions ' Risk/Reward (R/R) profile is generally quite attractive, with regional commitments underpinning government support for renewables. Although we predict that growth in the renewables segments and overall installed capacity levels by the end of the decade will be less pronounced than in other regions , the wind sector in particular is likely to undergo a substantial expansion. We believe the regional outperformers will be Poland and Turkey ( S ee our online service , September 17, ' Poland And T urkey To Drive Regional Expansion ' ) .

  • Latin America: Similarl y to the CEE, the regional R/R r atings score for Latin America is fairly positive, owing to sound demographic and macroeconomic fundamentals across many of the well-established markets in the region. Furthermore, positive steps towards liberalisation and a moderately comprehensive tendering process in the power markets further boost the prospects for investment in the region. Lo w projected growth rates dampen our overall outlook for Latin America, however we do highlight Chile and Brazil as markets with substantial renewables potential.

  • Emerging Asia: Attractive government policies encouraging the development of renewables and the already developed nature of many of the renewables s egments underpins the high R/R r atings awarded to countries included in the Asian region. As a result, we have forecast that installed capacity will reach over 344GW by 2021 - significantly higher than any other emerging region, driven primarily by India 's and China 's growing renewables industry. That said, growth rates across the region are set to be moderate .

  • Sub-Saharan Africa : Two key markets in the region, South Africa and Kenya are likely to dominate the SSA renewables sector over the coming decade, on account of their vast natural potential for renewable electricity generation and the support they are already receiving from international financial institutions. Although scoring poorly in terms of R/R Ratings, the opportunities and potential rewards on offer will no doubt attract attention, and this is reflected in our projections for growth.

  • Middle East and North Africa : The MENA area is poised for the highest growth of all regions, despite the relatively volatile business environment. Saudi Arabia 's solar sector is to drive the majority of this growth; however North Africa wind markets will also make a contribution. Although we remain cautiously optimistic regarding the region ' s ability to meet the proposed renewables targets, we still believe that installed non-hydro renewables capacity will reach a robust 36.8GW by 2021.

Risky But Rewarding Opportunities
Non-Hydro Renewables Capacity (2021e), Growth (% 2012f-2021f) and Renewables R/R Ratings