20 Aug 2008   |   News

China overtakes UK as a key country for investment in renewable energy

China has displaced the UK in the top five most attractive countries for investment in renewable energy for the first time, according to Ernst & Young.

Wind farm in Xinjiang, China (Photo Chris Lim/Creative Commons licence)

China has displaced the UK in the top five most attractive countries for investment in renewable energy for the first time in the indices’ five-year history, according to the latest Ernst & Young Renewable Energy country attractiveness indices, which track and score global investment in renewable energy in the first six months of 2008.

The UK dropped from fourth to sixth place in the all renewables index and from second to fifth place in the long-term wind index. The report shows that China is diversifying its energy supply by incorporating more sustainable sources into its rapidly expanding energy generation mix.

Jonathan Johns, head of renewable energy at Ernst & Young, said the Chinese surge has been driven in part, by the government’s renewable energy policy which aims to generate 15 percent of the country’s energy from non-carbon sources by 2020.

“Investment in China has been boosted by the government’s energy policy, which secures renewable energy as a vital and important part of the country’s energy mix. China’s stellar growth in renewables can also be attributed to the speed at which it has built up its supply chain capability, to the point where it is likely to have nine gigawatts of manufacturing capacity in a few years,” Johns comments.

“China is also likely to become a significant exporter of wind turbine equipment in a few years, adding to its already strong presence in the solar industry.”

One cause of the UK’s drop in the ranking was the delay to passing an Energy Bill, which is still going through Parliament. This is a strong contrast to the speed with which Germany has addressed the targets set by the EU’s Renewables Directive, climbing up the index to second in both the all renewables and the long-term wind index The country’s legislative framework, which includes the introduction of attractive tariffs to support the industry.

Germany obtained 72.7 terawatt-hour of renewable energy production in 2006, while the UK obtained just 18.1 terawatt-hours. In Germany the cost to the consumer is only 2.6 per kilowatt hour compared to 3.2p in the UK.

The action taken by Germany to develop incentives has forced Spain, the US and the UK to start re-evaluating their models. Johns believes this has the potential to change the face of the investment landscape significantly, causing a major shift in how countries attract investment in the sector, depending on the incentives and value for money for the consumer in terms of the number of tonnes of carbon dioxide saved.  

The US retains the top spot on the all renewable indices, with Germany, India, China and Spain rounding out the top five. The report includes updates on the renewables markets in the US, India, Spain, Australia, Italy and Ireland.

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