19 June 2013
Onshore and offshore wind generation in the UK are two of the strongest contenders for attracting funds from businesses and investors, according to the newest edition of PA Consulting Group’s Energy Investment Map, which launched this week.
The first online tool of its kind, the Energy Investment Map, rates the investment potential of 11 different renewable and conventional generation technologies, to give investors an overview of where they might search for the best opportunities. It also gives policymakers a valuable understanding of how their countries compare with others in terms of promoting different technologies and encouraging investment.
The newest edition of the map covers 30 countries in Europe, Asia Pacific, the Gulf, BRICS and the US to provide investors and policymakers with global insight.
UK investment opportunities in renewables
The UK ranks 6 out of 30 in the map’s renewable energy index, which rates countries according to anticipated internal rates of return and associated risks, as assessed by PA Consulting Group’s energy market and regulatory experts.
The UK’s position in the index is boosted significantly by its score for onshore wind and offshore wind. Both technologies score at the highest level (150+ points) in terms of investment potential, a level achieved by only ten out of a total of 330 technology/country-specific opportunities assessed for the index
UK investment opportunities in conventional generation
Despite recent improvements in the economics of conventional generation projects, policies favouring low-carbon generation have ensured that Western Europe remains a very difficult environment for investment in conventional power. This exemplified in the UK’s ranking of 12 in the map’s conventional energy index. Investment in conventional generation in the UK is rated overall as offering only relatively low to moderate IRR, accompanied by a moderate level of risk.
Of the four conventional generation technologies included in PA’s analysis, nuclear and CCGT gas score highest in terms of investment potential in the UK.
Mark Livingstone, energy expert, PA Consulting Group, confirms: “Global investors and international funds are showing significant interest in the UK’s energy infrastructure assets, largely due to the planned closure of existing thermal and nuclear generation and the policy support for new low-carbon options offered by the Energy Bill, which has now completed its passage through the House of Commons. While wind isn’t the only low carbon generation option, it is one resource that the UK clearly has in abundance.”
Global highlights in renewables
China heads PA’s renewable energy index due to a combination of extensive, high-quality renewable resources (and the potential for their development) as well as government support that provides attractive pricing for renewable energy. Other countries appearing in the top tier include Sweden, Denmark and Austria.
Countries on the Arabian peninsula, appearing for the first time on PA’s Energy Investment Map, are making significant progress in developing their renewable energy strategies. United Arab Emirates (ranked 20) boasts the region’s first renewable energy framework, while developments in Saudi Arabia (22) and Qatar (24) mean all three countries can be expected to rise steadily in the index over the coming years.
Global highlights in conventional
Many of the top countries for investment in conventional generation are characterised by fast-growing demand for power, combined with regulatory regimes that enable long-term contracts or other mechanisms to provide investors in new projects with secure cash flows and returns. India tops the ranking driven by a massive demand for new conventional power capacities. Poland (2), the Philippines (3), Turkey (7) and Saudi Arabia (10) all fit this pattern, with demand in some countries such as Turkey and Saudi Arabia being driven by the need for flexible conventional power to support ambitious renewables programmes.
Olaf Remmler, energy expert, PA Consulting Group says: “Uncertainty, complex market and regulatory conditions and the rapid advance of renewable technologies all mean decision-makers must place far greater emphasis on understanding not just fundamental market conditions, but the regulatory and economic factors that will affect their projects and investments.”
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Notes to the editor
About PA Consulting Group
We are an employee-owned firm of over 2,500 people, operating globally from offices across North America, Europe, the Nordics, the Gulf and Asia Pacific.
We are experts in energy, financial services, life sciences and healthcare, manufacturing, government and public services, defence and security, telecommunications, transport and logistics.
Our deep industry knowledge together with skills in management consulting, technology and innovation allows us to challenge conventional thinking and deliver exceptional results with lasting impact.
About the Energy Investment Map
Our initial analysis included 14 European countries: Austria, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Norway, Poland, Spain, Sweden, Switzerland and the UK. The latest edition covers an additional 16 countries: Australia, Brazil, China, India, Malaysia, Netherlands, New Zealand, Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Turkey, UAE and the US*.
*For more detailed analysis of investment potential in specific US electricity regions, see PA’s US Energy Investment Map. www.paconsulting.com/USenergyinvestmentmap
Our most recent analysis took place between March 2013 and May 2013 and includes seven renewable technologies: solar PV (photovoltaic), solar CSP (concentrated solar power); onshore wind; offshore wind; hydro; geothermal and biomass. We also look at four conventional technologies: nuclear; combined cycle gas turbine (CCGT), gas turbine (GT) and coal.
Business case calculations
Our business case calculations award a maximum score of 90 points, which is calculated based on the expected internal rate of return (IRR). The higher the IRR, the more points are awarded, up to a maximum of 90 points for each technology in all 30 countries. The IRR takes into account the factors that influence the financial performance of an energy project.
Similarly, our risk assessment is also based on a score of a maximum 90 points, which is weighted across all risk factors for each technology in each country.
Interpreting the results
Together, the business case and risk assessment scores give a total score out of 180 for each technology in each country. We interpret the score as follows:
• 150–180 points: Relatively high internal rates of return (IRR) due to excellent market, regulatory and infrastructure conditions, high demand for new capacities and very low levels of country, financing, project, technology and operational risk
• 120–150 points: Moderate to relatively high IRRs due to good market, regulatory and infrastructure conditions, moderate to high demand for new capacities and low levels of country, financing, project, technology and operational risk
• 90–120 points: Relatively low to moderate IRRs due to poor to moderate market, regulatory and infrastructure conditions, low to moderate demand for new capacities, and moderate levels of country, financing, project, technology and operational risk
• 90 points: Comparatively low or negative IRRs due to poor market, regulatory and infrastructure conditions, relatively low demand for new capacities and high levels of country, financing, project, technology and operational risk
Along with calculations and assumptions based on PA proprietary databases gathered in numerous projects, PA used publically available data from:
National and international statistical offices: US Energy Information Administration, Eurostat and Destatis.
National energy departments: South Africa Ministry of Energy; Energiekamer van de Nederlandse Mededingsautoriteit, Netherlands; New Zealand Ministry of Business, Innovation and Employment; Operador Nacional do Sistema Electrico, Brazil; Ministry of Energy and Mining, Brazil; Energy Market Regulatory Authority, Turkey; Ministry of Energy, Russia; Department of Energy and Climate Change, UK; Federal Ministry for Environment, Nature Conservation and Nuclear Safety, Germany; Department of Energy, Communications and Natural Resources, Ireland; Ministry of Ecology, Sustainable Development and Energy, France; Ministry for Climate and Energy, Denmark; Ministry of Economy, Poland; Ministry of the Environment, Czech Republic; Federal Ministry of Economy, Family and Youth, Energy and Mining, Austria; Ministry of the Environment, and Ministry of Enterprise, Energy and Communications, Sweden; Ministry of Employment and the Economy, Finland.
Authorities, operators or agencies: New Zealand Electricity Authority; Database of State Incentives for Renewable & Efficiency, US; National Renewable Energy Laboratory, US; Singapore Energy Market Authority; Australian Stock Exchange; Energy Regulator of Australia; Philippines Energy Regulatory Commission; Suruhanjaya tenaga, Malaysia; South Africa Energy Regulator; India Energy Exchange; Central Electricity Authority, India; Tennet TSO für Netzinformationen, Netherlands; Agentschap nl für alle feed ins, Netherlands; Brazilian Intercontinental Exchange; BOTAS; National Energy Commission; China Electricity Council; Oxford Energy Institute; European Commission; RES-Legal. Com; German Energy Agency; Danish Energy Agency; Danish Energy Regulatory Authority; Agency for Renewable Energy and Energy Efficiency of Switzerland; Swedish Energy Agency; Stattnet; Energinet; Energy market regulator of Spain; Gestore Servizi Energetici of Italy.