US loses clean energy investment title to China

September 9, 2010

Still attractive to renewable energy investors, but the US has now slipped behind China thanks to delays on clean energy legislation in Congress
The United States has lost its position as the most attractive location in the world in which to develop renewable energy projects, according to the latest report from financial advisers Ernst & Young.

China, which only entered the company’s Country Attractiveness Indices table in December 2004, has knocked the US off the top spot it had held since 2006.

Last year, China was tied with the US, but the US has now dropped two points owing to the failure by Congress to pass a national Renewable Electricity Standard this summer.

The situation in the US has also been hindered by the end of the Treasury grant program for new renewable energy facilities, a program set to end this December, which has not been extended by lawmakers on Capitol Hill.

The uncertainty about future returns resulting from the end of the program is expected to slow the renewable energy market.

Ben Warren, Ernst & Young’s Environment and Energy Infrastructure Advisory Leader, said that on the other hand, the “strong and consistent” support for renewable energy by the Chinese government meant that its position ahead of the pack was “well-merited”.

Mr Warren said: “Although the United States remains a highly attractive location for investors in renewable energy, it is clear that recent events have eased momentum. The US market continues to have significant potential but requires consistent legislative support to provide investors with the long-term confidence they need.”

Incentives

GE, a major player in the US renewable energy market, warned last month that the forthcoming end of US incentives could spell difficulties for future project development (see this BrighterEnergy.org story).

Industry lobbyists are calling for a 25% national renewable electricity standard to be set for 2025 and an extension of tax credit programs for developments.

Elsewhere in this quarter’s Ernst & Young rankings, other key renewable energy markets including Spain, Germany and India also lost ground owing to government policy issues regarding incentive programs.

Australia, New Zealand and Japan improved their situations slightly with supportive clean energy legislation including a 20% renewable energy target in Australia, a new carbon emissions trading program in New Zealand and “aggressive” climate policies in Japan.

Gil Forer, Ernst & Young’s Global Cleantech Leader, said: “Cleantech, including renewable energy, represents the technology and business model innovation that is driving the global transformation to a more resource efficient and low carbon economy. A successful outcome of this massive transformation requires collaboration among all stakeholders, including policy makers.”