May 2022 | 59th edition
Renewable Energy Country Attractiveness Index

RECAI

Does the need forenergy security
challenge the quest
for net zero?

Document title Additional text |BContents

02

04

06

Foreword

RECAI 59

PPA Index

08

14

22

Key developments

Analysis

Regional focus

Renewables highlightsfrom around the world

Divergence anddiversification will
help accelerate therenewables market andimprove energy security

Latin America:
seeking to bolster
energy security by
expanding renewables
generation

30

36

48

Insight

Data and methodology

Contacts

The global searchfor energy security:
the case for floating
technology• RECAI 59			
• PPA Index

Foreword

In the global search for energy security,
could diversifying to emerging green
solutions be the answer?
The global energy market is in a state of chaos. In thepast year, there has been unprecedented volatility
in the natural gas market, with a handful of factors
resulting in high demand and supply constraints.
Meanwhile, the war in Ukraine has sent European
nations racing to reduce their reliance on Russian gas.
Sourcing gas from elsewhere will not happen overnight,
of course. However, added impetus has been given toadding liquefied natural gas (LNG) import capacity,
as well as boosting green gas production and thedevelopment of other alternative fuels, which appear to
be regaining momentum at last.
In this edition of the RECAI, we take a deep dive into
the case for floating technology. Currently, there are
11 floating offshore wind farms generating 79MW.

But major growth is in the pipeline, with close to
100 projects — with a combined capacity of more than
26,000MW — in the early-planning stages.1 Given thatwholesale electricity prices in Europe have fluctuatedaround the €200/MWh (US$217/MWh)2 mark over the
past year, floating wind power — the cost of which is
expected to drop to US$70/MWh or lower by 20303 —looks primed to set sail.
Floating solar power has also garnered more interestas the cost of photovoltaic (PV) panels has plummeted,and global capacity jumped more than 100-fold in
the five years to 2021. For smaller countries withlittle available land, it could be a key technology in
generating carbon-free energy. As demand soars
for new sources of renewable energy, research andinnovation in this field could push floating solar from aniche area to mainstream.
Equally encouraging is that offshore floating power
generation could be used to produce green hydrogen.
Projects are already planned to combine electrolysis,
desalination and green hydrogen production on floating
wind platforms. Indeed, green hydrogen is expected to
be a key substitute for natural gas in the coming years.

Ben Warren

EY Global Power & Utilities
Corporate Finance Leader

It is just one alternative fuel gaining in popularity as
the conventional energy value chain undergoes anindustrial revolution, shifting away from electrons tomolecules. Companies are increasingly signing green

gas purchase agreements4 to supply industrial
processing needs. Biomethane producers arealso being looked upon to provide fuel forcompressed natural gas engines in heavy goods
transport fleets.5
So, while the divergence away from natural gas
is creating an attractive investment climate forrenewable energy, it is also helping to develop
an increasingly lucrative market for green gases.
This is a topic that the RECAI will be keeping aclose eye on in the future.
From a regional perspective, the RECAI 59
puts Latin America under the microscope.
With extensive renewables potential, thegreen energy sector in this region could
experience major growth if barriers such aspolitical uncertainty, a need for new regulatory
frameworks, and financing issues can beovercome. As attention continues to be drawn
toward green hydrogen, Chile, in particular, is amarket to watch as it seeks to produce the world’s
cheapest green hydrogen. Research6 used by thegovernment, projects that Chile will be able toproduce green hydrogen at US$1.05/kg by 2030.

Key takeaways• Geopolitical tensions, post-lockdown demand
for gas, and environmental concerns havethrust energy security to the top of agendas.
• Emerging technologies and green fuels will be
key to reducing the world’s reliance on gas.
• Floating wind and solar have the potential
to go mainstream as demand grows for new
sources of renewable energy.
• Green hydrogen is expected to be a key
substitute for natural gas in the coming years.
• Latin America is a green energy market towatch if it can overcome current barriers
to growth.

The energy market is in a state of flux, and gas
prices look likely to remain high in the short tomedium term. But this presents an enormous
opportunity for emerging green technologies togrow from niche markets to mainstream solutionsin the global quest for energy security.

Arnaud de Giovanni

EY Global Power & Utilities
Strategy and Transactions Leader

Renewable Energy Country Attractiveness Index (RECAI) 59

02

RECAI 59+7

USChina Mainland

1

2

3

UK

6

-2

Australia

568 Japan8

Saudi Arabia 40
40

Thailand 38

44

Kazakhstan 36

36South Africa 35
Norway 34

35

Switzerland 33

914 Chile

13
18

Taiwan 31
Vietnam 30
Belgium

22
26
27

25

29

Philippines

28

27

Argentina

19

28

31

23

21

24

17 Sweden

16

18
19

PolandMorocco21
22
GreeceSouth Korea
20

26

Egypt

25

24

23

IsraelFinlandTurkeyPortugal

FinlandIndia
India’s wind sector is struggling tomatch the explosive growth of thesolar sector and is unlikely to hit its
60GW installation target by 2022.

+3

The Finnish government has
approved the introduction of an
auction model to lease out public
waters for the development ofoffshore wind, starting in 2023–24.

16 Canada

17
29

+7

15 Italy

20
30

Mexico 32-4

13 Brazil

12

33

Denmark

12 Ireland

14

Current ranking shown in circles withprevious ranking noted at the bottomof each segment

32

GreeceGreece aims to double its installed
renewables capacity to around
19GW by 2030 and recently
energized a 204MW bifacialsolar park, the largest of its
kind in Europe.

Denmark has set a new target of
producing up to 6GW of hydrogenannually by 2030, one of the highest
targets in Europe.

15

No change in attractiveness sinceprevious index

34+4

11 Denmark

11

Decreased attractiveness comparedwith previous index

45

Austria 37

10 Netherlands

10

Increased attractiveness comparedwith previous index

38+3

9 Spain

3

43

Chile

4
7

Jordan 39

Germany has brought forward
its 100% green power target by
15 years, to 2035, and an 80%
by 2030 goal has been set toincrease energy security.

Droughts in Chile demonstrated
the market’s continued reliance onhydropower, while solar tenders
planned for June have beensuspended indefinitely.

7 India2

Germany

4 Germany
5 France

1+2

The Austrian government has
committed to provide €250m(US$264m) to support thedevelopment of renewables, while
Lower Austria has passed measures
to ease the renewable projectpermitting process.

Index
Since 2003, the biannual Renewable
Energy Country Attractiveness Index(RECAI) has ranked the world’s top
40 markets on the attractiveness of
their renewable energy investment
and deployment opportunities. The
rankings reflect our assessments ofmarket attractiveness and global
market trends.

Austria-1

PolandPoland launched tenders for three
new offshore wind concessions.
Capacity in the Polish Baltic Sea
zone is expected to be 8GW to11GW by 2040.

FranceMethodology

Despite a slight decrease in ranking,France sets ambitious 2050
renewables targets, with plansfor 100GW of solar and 40GW of
offshore wind, while also announcing€5b (US$5.3b) spending for
decarbonization of heavy industry.

See page 40 for RECAI methodology.

Renewable Energy Country Attractiveness Index (RECAI) 59

04

PPA Index

Spain and Portugal
The market is recovering well from a shock last September, after
a decree — to curb presumed excess profits by suppliers duringexceptional prices — was amended in November. Markets peaked inearly March, but are still volatile, especially for solar, so PPAs may
provide stability. Portugal is a much smaller PPA market, but growing,with the first deals made recently.

Balance of power shifts as the powerpurchase agreement (PPA) market
continues to growSince the PPA Index was introduced six months
ago, the market for PPAs has continued
to expand.
Exceptionally high and very volatile power
market prices are pushing buyers to fix theirprice of electricity for as long as possible, while
corporates are scrambling to make good oncommitments made at COP26 to decarbonize
their operations and supply chain. Demand for
PPAs has increased significantly and shows nosign of slowing.
On the supply side, however, several
bottlenecks are slowing progress. Backlogs inplanning approval and grid connections, built
up during the COVID-19 pandemic, have yet toease. These procedural and regulatory holdups
are being exacerbated by delays in the physicalsupply chain — in particular, China’s periodic
lockdowns of specific cities and districts areaffecting manufacturing, with materials needed
to create plant for new projects held up or
unavailable.
These factors are tipping the balance from thebuyers’ market of last year to a more balanced
picture, where sellers have some leverage innegotiating contracts and prices.
This is seen, for example, in a nascent trend
for developers to try to transfer some inflation
risk to the companies contracting to buy theirelectricity. For now, the market is balanced, sobuyers can push back in these negotiations.
Despite this shift in the market, the economics
are still strong in many locations with low, fixed
PPA prices, which are attractive against highand unpredictable wholesale prices.

As there is no sign of the geopoliticalinstability brought on by the war in Ukraine
calming down — and with the pressure todecarbonize only set to increase — theability to fix a tariff for green energy willcontinue to attract buyers.

US

Spain

1

US

PPAs grew in 2021 by 11GW, 3% higher than in 2020, from108 deals, with half of the 50 energy customers being new to
PPAs. However, costs have increased by 30% due to supply chain
constraints, with solar impacted by a Department of Commerce
investigation into imports from East Asia. With more corporates
chasing fewer shovel-ready projects, PPA prices have been rising.

Germany

2

3

UK

4

Australia

5

6 France
1

2

4

7

Sweden

7
5

8

3
10

8

Decreased attractiveness comparedwith previous index

Mozambique 30

26

No change in attractiveness sinceprevious index

27

New entry

Japan 28
Romania

21

15

Egypt

23

29

26

Ethiopia

6

18

19

28

17

20

15

25
24

17
23

ThailandSee page 44 for PPA methodology.

22

Ireland

21

20

19

Colombia South
Africa12 Poland

Traditionally an early mover in the European PPA market, theregion continues to attract corporate deals. Denmark, Finland andSweden have all risen up the index this issue, but — as in othermarkets — the availability of ready-to-build projects is scarcer
than before. COVID-19-related delays to planning processes andgrid enhancements are proving challenging, requiring patiencefrom sellers and buyers.

14 India22

16

GreeceNordics

13 Brazil

13

18

Portugal

MoroccoBelgium

NorwayChile

There has been a complex PPA market in recent months, as
corporate processes run in parallel with the UK government’s Round 4
auction. Auction awards were delayed until July. Despite the auction“competition,” the corporate market has been buoyant, with many
new buyers. High wholesale prices and increased capex costs haveresulted in PPA prices rising.

11 Italy

12

14

24

27

10 Denmark

16
9

Current ranking shown in circles withprevious ranking noted at the bottomof each segment

Lithuania 29

9 Netherlands

11

Increased attractiveness comparedwith previous index

Finland

UKJapan
A new entrant to the PPA Index, it is still early days. An active
feed-in tariff market and policy barriers meant that PPAs were not
attractive or suitable for renewable sourcing. However, with many
corporates wanting green power, and a new feed-in premium
scheme from April 2022, more PPAs are expected, as corporate
users without electricity retail licenses can now participate.

Renewable Energy Country Attractiveness Index (RECAI) 59

06

Key developments

Renewables highlights fromaround the world1

No change

RECAI ranking

Energy security has risen to the top ofpriority lists, as the war in Ukraine has led toincreased geopolitical instability and spiraling
gas prices and the world’s ongoing recovery
from the depths of the COVID-19 pandemic
has boosted energy demand.

The US: breakthroughs sought in hydrogen andoffshore wind
The U.S. Department of Energy is deploying US$10b in funding for the advancementof green and blue hydrogen7 as part of the Infrastructure Investment and Jobs Act,
which was passed in 2021. Development of regional clean hydrogen hubs will beallocated US$8b as the market takes initial steps forward in developing a national
clean hydrogen network.
An additional US$1.5b will be allocated for research into, and development of, cleanhydrogen manufacturing and recycling, and a clean hydrogen electrolysis program
aimed at reducing the production cost. The US currently produces more than 11%of the 90m tonnes of hydrogen created globally each year; however, the majority is“gray” hydrogen, produced from natural gas.
On 11 May 2022, the Bureau of Ocean Energy Management held a wind energy
auction for two lease areas offshore of North and South Carolina.8 If developed,
the areas could have a capacity of 1.3GW. In autumn 2021, the US identified up toseven potential offshore wind lease sales by 2025. Currently, the market has one
operating offshore wind project, the 30MW Block Island Wind Farm off the coast of
Rhode Island.

Governments around the world are looking to accelerate and broaden thescope of their renewables programs to help reduce their reliance on imported
energy at this volatile and unpredictable time. Here, key developments within
10 markets that are taking interesting and varied approaches to trying tosecure their energy supplies are explored — from the tripling of onshore windand solar in Germany to green hydrogen investment in India.

Renewable energy featured heavily in President Biden’s US$5.8t budget request
submitted to Congress in March, with US$2.1b sought for clean energy
infrastructure.9

2

No change

RECAI ranking

China Mainland: prioritizing geothermal andhydrogen sectors, and rural areas
China Mainland has announced it will prioritize geothermal, hydrogen and tidal
energy10 as it seeks to develop new energy sources on a large scale. The market will
adopt a region-specific approach, evaluating the presence of natural resources andindustrial development in each district.
As China seeks to reach peak carbon emissions by 2030 and carbon neutrality by
2060, President Xi JinPing has highlighted that wind, solar and biomass will be relied
upon heavily in its energy transition. He indicated that the government will seek toincrease the development of large, integrated wind and solar project campuses.
China is also seeking to promote renewable energy in rural areas,11 calling on
developers to set up projects in grasslands and forested regions, and on land thatis unsuitable for agricultural use. A budget is also being allocated to develop andupgrade transmission networks in underdeveloped regions. In particular, the central
and western regions will be prioritized for the development of utility-scale solar andwind projects, as well as biomass and geothermal energy for district heating.

Renewable Energy Country Attractiveness Index (RECAI) 59

08

Key developments

3
Up 2

RECAI ranking

The UK: battery storage and floating offshore big
winners in recent auctions
Battery storage projects won record subsidies12 in February’s auction, with close
to 1.1GW of projects receiving capacity subsidies. This marks a more than fourfold increase versus last year. In total, 107 projects, most of which are new builds,
received capacity, while only about 10% failed to win subsidies. Most battery storage
schemes have a duration of more than two hours and had their capacity contracted
for 15 years. They are to be built by winter 2025. Despite the record auction of
1.1GW for battery projects, they still represent only a small proportion of subsidies
won, as a total of 42.3GW of capacity was procured at the T-4 Capacity Market
auction in February 2022. Experts warn that the nascent industry faces headwinds,
given a lack of available grid connections.
In January’s 2022 ScotWind tender,13 floating offshore scored a victory, with the
Scottish government awarding more than half of the 24.8GW to floating windprojects. In total, 17 projects were successful, with the winners of the round agreeing
to pay close to £700m (US$912m) of option leasing fees.

The market also achieved a first when it awarded 148MW of biomethane plant
capacity in a slightly undersubscribed auction. Bids were for plants with an installedcapacity between 151kW and 20MW, and energy prices ranged from €169/MWh(US$184/MWh) to €190/MWh (US$207/MWh). Another biomethane auction is due
to be held on 1 October 2022.
In its most recent onshore wind auction,18 Germany awarded 1.33GW, of which
326MW was in the region of Lower Saxony. Energy prices awarded ranged from
€48/MWh (US$52/MWh) to €59/MWh (US$64/MWh).

7
Down 4

RECAI ranking

4
Up 2

RECAI ranking

Germany has announced ambitious renewable energy commitments, vowing to reach
100% green power by 2035,15 moving forward its target date by 15 years. A nearterm goal of 80% by 203016 has also been set, with the market promising to phase out
Russian oil imports by the end of 2022. Currently, about 41% of its power comes fromrenewable energy.
New legislation, announced in late February, aims to triple annual additions of onshore
wind from 3GW to 10GW in 2027. Offshore wind will be more than doubled, withcumulative capacity increasing to 70GW in 2045. And solar expansion will be nearly
tripled, from 7GW to 20GW annually in 2028. This comes as Germany has decided tophase out nuclear power, with its last three reactors scheduled to go offline in 2022.
In January 2022, Germany’s rooftop solar tender17 was heavily oversubscribed, with
209 bids submitted, of which 136 were accepted for 156MW. The region of SaxonyAnhalt was awarded the most bids, with 25 successful applications for 34MW. Energy
prices awarded spanned from €57/MWh (US$62/MWh) to €83/MWh (US$90/MWh),with a weighted average around €74/MWh (US$81/MWh).

India unveiled its Green Hydrogen Policy19 in February 2022, with a goal to produce acumulative 5m tonnes of hydrogen by 2030. The policy will promote green hydrogenand green ammonia projects by providing a 25-year waiver for transmission charges.
Producers will also be allocated land at ports for storing green ammonia for export.
By waiving transmission charges and increasing the size and scale of hydrogen
manufacturing, India hopes to halve the price of clean hydrogen.20 The government
has set a target to bring down the cost of green hydrogen to US$2.50/kg by 2025 andto as low as US$1/kg by 2030. It is estimated that the market will need investments ofaround US$25b from the public and private sectors to form a domestic green hydrogen
supply chain with a national installed electrolyzer capacity of 25GW, to reach its goal of
producing 5m tonnes of green hydrogen by 2030.

After full agreements are signed, the projects will begin the consenting process andlook toward financing options. The majority are forecast to reach financial close by
2028, with construction expected to be completed in 2030–31. Meanwhile, resultsof Round 4 of the UK’s Contracts for Difference (CfD) auction14 are expected to beannounced in the early summer of 2022. Opened in December 2021 with a draft
budget of £285m (US$371m), it is the biggest auction yet, aiming to secure up to
12GW of renewable energy generation for delivery between 2023 and 2027.

Germany: all-green target moved forward to 2035,
first biomethane auction held

India: green hydrogen policy unveiled

The India Hydrogen Alliance has set a target of establishing five large GW-scale greenhydrogen hubs for development within the next 18 months. And India also establisheda joint hydrogen task force21 with the United Arab Emirates in February, as the twomarkets look to scale up technologies.

15
Down 2RECAI ranking

Italy: eyeing floating offshore wind, but renewables
undersubscribed
Italy is planning tenders over the next five years to award 3.5GW of floating offshore
wind22 projects. The auctions, between 2022 and 2026, will see developers bid for
20-year CfDs. The market has set a proposed tariff of €165/MWh (US$180/MWh) for
the initial auction, with the price expected to be lowered for subsequent tenders.
Currently, only one small-scale (30MW)23 fixed-bottom offshore wind project has been
built in Italy. There has been tremendous interest in preliminary consultations, however,with 17GW of grid connection capacity for floating offshore wind projects having beenpresented to grid operator Terna.

Renewable Energy Country Attractiveness Index (RECAI) 59

10

Key developments

State energy agency GSE’s seventh renewables auction was heavily undersubscribed,24
with a total of 975MW of an available 3.4GW of capacity awarded between 59 solar PV
projects and 18 onshore wind projects.
So far, all seven rounds have been undersubscribed in Italy. In the eighth auction,
which closed on 2 March 2022, GSE has made available 3.35GW of capacity that was notawarded in previous rounds,25 with winners scheduled to be announced on 31 May 2022.

22
Down 1RECAI ranking

South Korea: renewable standard raised as green
energy ambitions growSouth Korea has raised its renewable portfolio standard policy26 for independent power
producers with more than 500MW of capacity to 12.5% for 2022. The market will keep
building momentum by increasing the ratio to 14.5% in 2023, 17% in 2024, 20.5%
in 2025 and 25% in 2026. Last year, the ratio was raised to 10%. The move is part ofSouth Korea’s plan to reach its 2030 greenhouse gas reduction target of 40% and its
target of carbon neutrality by 2050.

offshore wind energy competitions with a capacity of 1.2GW are on the agenda forupcoming tenders.
As a result, Turkey was recently named as one of the top four countries33 for offshore
wind energy potential by the Global Wind Energy Council.

28
Down 1RECAI ranking

This comes as the Philippines’ proposed National Renewable Energy Program for
2020–40 has set a target of 35% green energy35 in the power mix by 2030 and 50%
by 2040. In recent years, the share of renewable energy in the generation mix has
declined: it sat at 34% in 2008 and is currently at 21%.

25
Up 3

RECAI ranking

In 2020, the market announced a ban on all new coal projects, leading to Philippinescompanies expanding their renewables portfolios.

35
Down 1

Turkey: 2.8GW of grid capacity earmarked forrenewables
Turkey has set a target to increase the share of renewable sources in its generation mix
from 59% to 65% by the end of 2023.
Grid capacity will be allocated to 2.8GW of renewable power projects31 in its €5b(US$5.4b) tender round in early 2022. Grid connection rights will be provided for
1.3GW of hybrid power plants combining solar and wind installations, while 784MW will
be reserved for single-technology projects of solar parks or wind farms. An additional
680MW will be provided for small-scale unlicensed renewable plants. The projects are
expected to be completed within two years of the awards.
The Turkish government is also developing an offshore wind energy road map32 withinternational financial institutions, which it will publish later in 2022. It has indicated that

The Philippines is targeting the addition of 2GW of renewables capacity34 in its next
tender. It is seeking to add 1.4GW of solar, wind, hydro and biomass projects on theisland of Luzon; 400MW of biomass, solar and wind power in the Visayas region; and200MW of hydro, biomass and solar capacity on the island of Mindanao.
Once a ceiling rate is determined, the government will auction the projects over a
two-month period. Privately held power distribution business Manila Electric Company
is also accepting bids for 850MW of solar and battery supply projects.

Amid its announcement of more ambitious climate targets at COP26,27 the market is
expected to become a leader in offshore wind and clean hydrogen. Last year, plans were
unveiled for the 8.2GW Shinan offshore wind project,28 which will supply power to Seoul
and the port city of Incheon and is expected to cost KRW48t (US$40.3b). A second
megaproject was also announced, with a 6GW floating wind complex29 to be developed
off the coast of Ulsan. This would be the world’s largest floating offshore wind projectand is scheduled to be built by 2030.
South Korea has also announced that 624 hydrogen buses30 will be put on the roadsof the port cities of Busan and Ulsan by 2025. Subsidies for the world’s largest-everorder of hydrogen buses amount to KRW187.2b (US$157m). The market currently has
112 hydrogen filling stations and is expected to add 38 more by the end of the year.

The Philippines: seeking to add 2GW of renewables
and reach 35% renewable energy by 2030

RECAI ranking

South Africa: renewables growth seen as thesolution to load shedding
South Africa has awarded 25 contracts for renewable energy projects,36 worth a
combined ZAR50b (US$2.8b), as it seeks to combat load shedding and reduce its
reliance on coal. The country has been struggling with load shedding since 2007
because of a failure to build new power plants, and it is estimated that blackouts costthe economy more than US$30m a day.
The latest awards are expected to boost South Africa’s generation capacity by 2.6GW,
roughly 4.5% more than at present, with the addition of 12 new wind farms and
14 PV plants. With South African electricity company Eskom in debt by several billion
dollars,37 a number of companies are harnessing solar power, with the aim of being
100% dependent on solar by 2025.
The city of Cape Town announced in February that it will seek to procure as much as
300MW of renewable energy38 through upcoming tenders aimed at independent power
producers. A first tender will be held for projects ranging in size from 5MW to 20MW,
and a second tender, for projects of more than 20MW, will be held shortly afterward.

Renewable Energy Country Attractiveness Index (RECAI) 59

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Analysis

Divergence and diversification will
help accelerate the renewables
market and improve energy security
The natural gas market has faced
unprecedented volatility over the past
year, with prices rising rapidly even
before the war in Ukraine. In the UK,
for example, prices increased by 367%,
from £0.47 (US$0.62) per therm on
1 April 2021 to £1.73 (US$2.27) per
therm on 21 February 2022.

The drivers have been a combination of high demandand supply constraints across multiple markets. In
Latin America, for example, there was high demand
for gas throughout most of 2021 because of seasonaldrought and reduced hydropower availability. Asia’s highdemand for gas was driven in large part by the region’s
recovery from the early days of the COVID-19 pandemic
and the lockdowns that came with it. Additionally,a summer heatwave in 2021 drove strong demand
for gas-fired generation. China struggled to meet its
power requirements, while South Korea used LNG tocompensate for nuclear power outages.
The situation was exacerbated by rising competition
between Europe and Asia for LNG — especially as
seasonal demand rose over the European winter —and by supply and transport constraints among gas
producers. This included outages at Russian production
facilities and in pipelines to Europe.

“

The current situation
with energy acrossEurope brings what used
to be called the energy‘trilemma’ massively
back into focus – thetrilemma being making
it low carbon, making it
affordable and making
it secure.
Alex Brierley
Co-head, Octopus Renewables

Anthony Tricot

EY UK&I Head of Generation and Power
Markets, Economic Consulting

The war in Ukraine has resulted in further upheaval
to the market, with new gas price spikes in March. UK
short-term prices rose as high as £5.01 (US$6.58) per
therm, from £1.73 per therm before the war, while
prices on the Dutch Title Transfer Facility (TTF) hub had
exceeded €6.33 (US$6.89) per therm by 7 March 2022,
up from €2.60 (US$2.83) per therm on 22 February.
Illustrating how some markets have been more exposed
than others to the impact of recent developments,
the US Henry Hub benchmark’s first-quarter peakcame on 2 February, when it reached US$6.70 per
million British thermal units (mmBtu).39 Meanwhile,international natural gas spot prices such as the Japan
Korea Marker (JKM) and Dutch TTF both peaked on
7 March before easing. European LNG prices reached
US$42/mmBtu, their highest level in four years.
Natural gas prices are also always strongly influenced
by the weather. On a weighted average basis, forexample, heating degree days (a measure of how muchcolder a period is relative to average temperatures)in the US are 14% below normal in the first quarterof this year. Historically, that translates to a roughly
198 million cubic meters (mcm)-per-day reduction
in gas demand from a base of about 2.8 billion cubic
meters (bcm) per day. Meanwhile, production continues
to come back from its pandemic lows, with US output
at the end of the third quarter of 2021 up by 113mcm
per day compared with the third quarter of 2020.
This has helped relieve some of the upward pressure
on US natural gas prices. Europe, on the other hand,
has had to contend with a colder-than-expected winter,inventory levels that are at, or close to, five-year lows,
and tight Russian supplies. These factors have allcontributed to skyrocketing European prices, whichhave subsequently been exacerbated by the war in
Ukraine and the continent’s response to it.
“The current situation with energy across Europe
brings what used to be called the energy ‘trilemma’massively back into focus — the trilemma being
making it low carbon, making it affordable andmaking it secure,” said Octopus Renewables’ Co-head,Alex Brierley.
Forward curves for European prices remain elevatedinto 2023, supported by similarly high oil and coalprices as the entire energy complex continues to pricein supply risk.

Renewable Energy Country Attractiveness Index (RECAI) 59

14

Analysis“Our expectation is that this current situation is going
to be a massive accelerator for renewable energy
rollout across Europe, and the globe, actually,” said
Brierley. “What I think we’ve always struggled with isa lack of global coordination. But I’m seeing evidenceof more global coordination and that can only begood thing.”
Information company Energy Intelligence has similar
expectations of how current developments will shapethe energy transition.
“The gas supply and price situations add impetus to
stepping up renewables deployment,” said EnergyIntelligence’s Director, Research and Advisory, Ian
Nathan. “There is an energy security component, ofcourse, which reduces exposure to a fuel with a volatile
price that requires significant imports. But it helps
meet emissions goals as well — something that wasin the works long before European dependence on
Russian gas became a crisis. So, while the transition
may appear to be bumpy, the longer-term goal remains
intact — and will gain even more policy momentum.”The extent of demand for
Russian gas
Against this backdrop, the EU is proposing afundamental rewriting of its energy policy. Throughits proposed REPowerEU plan, it is aiming to reduce
its dependence on Russian gas imports by two-thirds
within a year40 and phase them out altogether “wellbefore” the end of this decade. The private sector isalso stepping up with a wide range of moves aimed atexpediting new energy projects.
“There has been a really positive industry reaction andgovernmental reaction to the current gas prices,” said
Lightsource bp’s Director of Power Markets, Europe,
Zosia Riesner. “And it’s come at the time when there
was already significant momentum toward renewables
and low carbon, and that transition was happening. But
the focus on trying to accelerate this transition more
rapidly as we look to reduce reliance on gas is clearly
helpful for that renewables transition.”
At less than 4% of its supply, the UK’s reliance on
Russian gas is low relative to most European countries
because of its North Sea gas production and LNG

import infrastructure. But it has expressed an intention
to further diversify away from Russian imports.41
The UK government unveiled a new energy strategy in
April 2022, outlining steps to improve energy security
and reduce dependence on imports. The plan entails
expansion of domestic renewable, nuclear and, in the
shorter term, fossil-fuel sources of energy.42 The UK’s
strategy illustrates the diversified approach required to
improve energy security.
“Options for displacing Russian gas in Europe more
broadly include alternative gas supply and a trajectory
toward lower gas consumption altogether, which
includes renewables and other fuels over the longer
term,” said Nathan.
Across Europe, new LNG import capacity and pipelines
would be necessary to source gas from elsewhere.
Landlocked Central and Eastern European countries
in particular are heavily exposed to Russian gas andwould find it more challenging to pivot to an alternative
source than those with coastlines and existing orplanned regasification capacity, despite rising pipeline
connectivity.

Increasing global
gas prices

367% UK

April 2021–Feb 2022

Imports of gas from
Russia 2021

EU 45%

Germany 55%

Across Europe, new
LNG import capacityand pipelines would benecessary to sourcegas from elsewhere —and while accelerating
renewable deployment
could help reduce theneed for gas generation,other fuels andtechnologies would be
required too.

“

Options for displacing
Russian gas in Europe
more broadly include
alternative gas supply
and a trajectory toward
lower gas consumption
altogether, which includes
renewables and other fuels
over the longer term.
Ian Nathan
Director, Research and Advisory,
Energy Intelligence

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Analysis“For those further inland, gas sourced fromneighboring-country LNG imports represents one gasreplacement option, particularly where infrastructure
expansion — including pipeline and import capacity — isalready in the works,” said Nathan. “Bulgaria is one
example. But it will not be an easy task for all Central
and Eastern European countries, which is why the
response to pressure is clearly mixed.”
Proposals under the REPowerEU plan also include
making improvements to energy efficiency, as well
as working to diversify energy sources and reduceoverall demand for gas from heating and power
generation. Actions to source gas from elsewhere
and, simultaneously, reduce gas use by replacing itwith alternative energy sources have a lead time ofseveral years.
Moves to diversify the power generation mix include
the acceleration of heat electrification, support for thecommercialization of hydrogen as a replacement fueland, potentially, a slowdown in the decommissioningof nuclear generation. In the short term, coal-fired
generation has risen,43 though countries will be keen to
avoid treating this as a longer-term option, given how it
undermines their decarbonization targets.
In 2021, the EU imported 155bcm of gas from Russia,
accounting for around 45% of the bloc’s gas imports.44
The figure is even higher for some European countries,
with Germany importing, on average, roughly 55% of
its gas from Russia in recent years.45
At the time of writing, sanctions packages implemented
by the EU and UK included some significant action
against the Russian energy sector, such as thecancellation of the regulatory certification of the Nord
Stream 2 gas pipeline from Russia to Germany and an
EU ban on Russian coal imports.46 Expectations thatfurther energy sanctions could be brought in, or that
Russia could halt supplies if relations between it andthe EU deteriorate further, have accelerated the risein gas prices.
In response to the sanctions, Russia has demanded
payments for its gas in rubles. While there has
been pushback against this from countries
including Germany,47 payments come due in May,and this will put Russia’s threat of cutting off supplies
to the test.

Europe looking at additional
LNG imports
Additional LNG imports have been seen as analternative source of gas for Europe for some time.
In particular, the US and Qatar — both of which areglobal leaders in the industry and are in the process of
expanding their gas liquefaction capacity — have been
identified as potential suppliers of additional LNG.
Imports from these producers could be increased
through state-to-state facilitation of long-term supply
agreements. US President Joe Biden announced
in March that his administration would work withinternational partners to supply at least an additional
15bcm of LNG to the EU in 2022, with expected
increases in supply over the subsequent years.48 US
LNG exports to the EU hit a record high of more than
22bcm in 2021.49
Ramping up EU LNG imports would require a significant
expansion of regasification capacity on the continent,
and momentum among developers is picking up. Rapid
deployment of a floating storage and regasification unit
(FSRU) is expected to take roughly two-and-a-halfto three years. Italy, France and Germany are among
those markets exploring opportunities to deploy
FSRUs,50 while companies in Germany are also taking
steps to expedite development of new onshore
regasification capacity.
In the short term, national approaches to finding
alternative sources of gas supply are starting toemerge. For example, Germany is in discussions with
Qatar on LNG supplies,51 while, in April, Italy agreed
to boost gas imports from Algeria by around 40%.52
Italy’s Eni also signed a separate deal to increase gas
production in Egypt, with a view to sending more
Egyptian LNG to Europe.53“

There has been a really
positive industry reaction
and governmental
reaction to the current
gas prices. And it’scome at the time when
there was alreadysignificant momentum
toward renewables andlow carbon, and thattransition was happening.

US exports of liquified
natural gas (LNG) to EU
2021

22bcm

2022

37bcm

Zosia Riesner
Director of Power Markets, Europe,
Lightsource bp

Production of natural gas has continued torise from pandemic lows

Q3 2020
Q3 2021
US output up 113mcm per day

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Analysis

The challenge of new
pipeline options
New pipeline capacity is being considered to open
fresh supply routes to Europe, while various countries
are also exploring options for ramping up gas
shipments on existing pipelines. In the short term,
for example, Norway’s Equinor will boost output by
postponing some maintenance and making certain
other adjustments, together with pipeline operator
Gassco, in an effort to send more gas to Europe inthe summer of 2022.54 In the longer term, Norway
would need to make additional gas discoveries to add
more supply beyond projects it is already planningto develop.55 Separately, the UK is also arranging toboost oil and gas exploration and production from theNorth Sea in the nearer term.56
Turkmenistan and Northern African gas producers,
particularly Algeria, have been identified as
potential supply sources that could be connected
to Europe via new or existing pipelines. However, interms of new projects, major pipelines are complex
technically, commercially and in terms of regulation,
especially if they cross multiple “third” (not theorigin or destination) countries, as a pipeline from
Turkmenistan would.
Turkmenistan’s energy policy, however, has been
focused largely on gas exports to China in recent
years, while geopolitical challenges, among others,
have hampered the proposed Trans-Caspian Gas
Pipeline to Europe, which has been under discussion
for more than 20 years and is still a distant prospect.
The Trans Adriatic Pipeline, connecting Italy to
Azerbaijan, required four years of pre-construction
activity and four years of construction before
commissioning in 2020. New pipelines could
expect similar timelines for construction, even
where negotiation and pre-construction processes
are accelerated.
In addition to intercontinental pipelines, betterinterconnection could be pursued in Europe totake advantage of the relatively secure position ofmarkets such as Spain, which has a high penetrationof LNG but currently lacks the infrastructure
to shift significant volumes of imported gas toNorthern Europe.

Seeking to reduce gas use
These challenges, and the likely lead times required topursue any major infrastructure project, mean that supply
will struggle to meet demand if Russian gas production
is frozen out of global markets, so gas prices are likely toremain high in the short and medium term.
This is expected to help spur development of alternative
sources of energy, including renewables and emerging
fuels, such as blue and green hydrogen. However, this,
too, will take time, especially in the case of blue andgreen hydrogen, which still needs to be commercialized.
Steps to reduce the share of gas in power generation
include the electrification of domestic heat, as wellas the ramping up of wind, solar and other renewableenergy sources.
There are various obstacles to be overcome as part ofthis process, including accelerating timescales required
to deliver new projects.
“What we’re looking for is a shorter development cycle.
Why does it take seven years to get a wind farm fully
permitted and construction-ready?” said Octopus’s
Brierley. “We’re looking for policy and planning support,
and we’re looking for the whole grid connection process to
become much easier and much quicker.”
Efforts to remove or minimize regulatory and permitting
hurdles are underway and have been welcomed by theprivate sector. However, not all government intervention
is guaranteed to prove helpful, noted Lightsource
bp’s Riesner.
“Some of the initiatives that have been announced —for example, by the EU, around removing planning
roadblocks — and boosting long-term PPAs [powerpurchase agreements] are really helpful,” said Riesner.
“The flip side is the uncertainty that’s been created bysome potential interventions in the market. Those are areal challenge.”
She cited Italy as an example of a market where
removing barriers to permitting would be helpful,and Spain as one where additional intervention in thewholesale market could shake investor confidence.
“There’s positive intervention, such as removing blockers,
and then there’s more challenging intervention. It is
all for the right reasons — they are trying to maintainaffordability — but the intended consequence could be aslowdown in the renewables market,” Riesner said.

While the renewable industry grapples with thoseissues, it has been suggested that current risks to gas
supply could also force a rethink of various markets’plans to phase out nuclear power in the coming years.
However, nuclear power is a polarized issue and heavily
affected by local public sentiment, so some markets
will be far more supportive of using it to bolster supply
security than others.

as the marginal technology in markets such as the UK
by alternatives — such as biomass or hydrogen-fired
turbines — on an enduring basis.

New nuclear facilities would take years to build
and have even longer lead times than LNG importterminals. However, some markets could opt to extend
the lifespan of their existing nuclear power plants(NPPs). This is already happening in Finland, where,
in March 2022, Fortum applied to extend the lifespanof both reactors at its Loviisa NPP by 20 years, to2050.57 And Belgium has unveiled plans to postpone its
planned nuclear phase-out by 10 years, to 2035, while
extending the lifespan of its two newest reactors.58

Power purchase agreements (PPAs)60 could be asolution for consumers facing pricing pressures, aswell as a way for developers to secure long-term pricecertainty. This assurance and the revenue certainty
that comes with it could be sufficient to incentivize
significant new renewable rollout. This would mean areduction in overall power prices because of a greater
proportion of generation being contributed by low
marginal cost technologies.

On the other hand, Germany considered, and thenrejected, the possibility of extending the lifespan of its
NPPs beyond what current plans allow.59 In early March
2022, its Federal Ministry for Economic Affairs andClimate Action said that the costs and risks of keeping
nuclear plants open for longer outweighed the benefits.
Nuclear policy could change if there is further
disruption to gas supply, but, in Germany’s case, there
is not much time, given that its remaining nuclear
capacity is due to go offline this year. This puts morepressure on renewables and battery storage to be
developed as a viable alternative to natural gas in the
power generation mix.

Greater diversification expectedin the longer termThis would require a substantial reduction in the costsof these technologies, which could be achieved throughtechnological improvements because of subsidy-driven
rollout or through a direct subsidy.

If disruption to gas supply proves to be long term
because of extended supply shortages or sanctions
on Russian production, gas prices can be expected toremain high for the next few years. Given the role of gas
generation in setting the power price in many European
markets, this will mean an enduring environment ofhigh power prices, which would make investment in
new renewables more attractive for developers in the
short term. It would also make programs of investment
in renewables more attractive for governments, as therelative cost of those technologies decreases in relation
to gas-fired generation.
Even beyond the explicit programs to increase
renewable investment to reduce dependency on Russiangas, price levels for both gas and power could be
expected to bring forward new investments.

From the mid-2020s, greater diversification of gas
sources is expected, with infrastructure build-out
already underway. Additionally, a greater mix of otherfuels and technologies is expected to be more readily
available from the middle of the decade. As a result,prices are anticipated to normalize to near previous
expectations.

This is already playing out. In addition to the UK,
Germany was among the markets to unveil plans toaccelerate the expansion of renewable energy in early
April.61 More broadly, the EU is considering adopting
more ambitious renewable energy targets, even as it
works to increase non-Russian gas exports.62 Proposals
for the bloc’s energy strategy are expected in May and,in the meantime, more announcements on renewables
could come from individual countries.

A lower power price environment could be achieved
through increased production or improved availability
elsewhere — including expansion of LNG regasification
capacity in Europe and a decline in Asian demand — orthrough a decoupling of gas and electricity prices. The
latter would mean the replacement of gas generation

It will not be straightforward for Europe to reduce its
dependence on Russian gas, and further upheaval
in the natural gas market is expected. A diversified
strategy will be necessary and will help to accelerate
the deployment of renewables, and other fuels andtechnologies, over the coming years.

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Regional focus

Latin America: seeking to bolster
energy security by expanding
renewables generation
Latin America has significant renewablepotential and, as the energy transition
accelerates, attention is turning
increasingly to the question of how
to harness it to enhance the region’senergy security. Various markets in theregion are taking different approaches
to tackling this challenge.

Brazil’s renewable capacity and generation far outstrips
that of other Latin American markets, but othernations are taking significant steps to advance theirrenewables industries. While they all face regionwide and global challenges — such as supply chain
constraints created by the COVID-19 pandemic — there
are also local and market-specific factors to consider.

Cumulative installed renewables capacity (MW)

“Latin American countries share several advantages,
such as attractive resources and flexible power
mixes reliant on hydropower and gas. Similarly, they
suffer from the same illnesses,” said Rystad Energy’s
Renewable Energy Analyst for the Americas, Marcelo
Ortega. “On the technical side, countries need torevamp their aging transmission and distribution
systems, as current infrastructure is not designed
to connect renewable resource-rich areas, typically
far away from cities, to load zones. On the otherside, political support for renewable projects sways
with changing governments, increasing the risk fordevelopers willing to invest in these countries.”

400,000

Colombia and Brazil are among the countries withelections later in 2022.

“
Fernando Machado

Partner, Strategy and Transactions,
Infrastructure Capital and Debt Advisory,
Ernst & Young Assessoria Empresarial Ltda

André Flávio

Executive Director, Business Consulting,P&U and Construction Industry,
Ernst & Young Assessoria Empresarial Ltda

Latin Americancountries share several
advantages, such as
attractive resources andflexible power mixes
reliant on hydropowerand gas. Similarly, they
suffer from the same
illnesses.

500,000
450,000

350,000
300,000
250,000
200,000
150,000
100,000
50,000
—

2020

2025

2030

2035

BrazilMexicoChile

Argentina

Colombia

Peru

Source: GlobalData website, power.globaldata.com/, accessed 9 May 2022.

Marcelo Ortega
Renewable Analyst for the Americas,
Rystad Energy

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Regional focus

Brazil looks beyond hydropower
Brazil leads the way in renewable capacity and generationin Latin America. It had 158GW of renewable capacity
in 2021, according to GlobalData.63 And hydropower
dominates this capacity, accounting for 110GW in
202164 and representing around 58% of Brazil’s power
generation mix.

Brazil installed capacity, by
technology (MW)Hydro
Onshore wind
Gas
Biopower
Solar PV
Oil
Coal

4%
2%

6%

11%
10%
8%

Nuclear 1%

58%

Source: GlobalData website, power.globaldata.com/, accessed 9 May 2022.

Such a high level of dependence on hydropower,
however, leaves Brazil vulnerable to the impactsof drought. Parts of the country were hit hard by
drought in 2021 and, while this was followed byperiods of heavy rainfall in early 2022, it illustrates
concerns over the reliability of hydropower.
Against this backdrop, efforts to spur thedevelopment of wind and solar power are being
stepped up. Wind is more advanced than solar in
Brazil for a number of reasons, including that windturbines can be partly produced and assembled
locally. This allows developers to obtain financing
from Brazilian development banks.
Solar panels are not yet manufactured locally andneed to be imported, mainly from China. Local
content requirements mean that solar developers
have limited access to local long-term funding
from development banks, and the exchange rate
represents a further challenge for companies
importing solar panels. Brazilian developmentbanks, such as BNDES and BNB, require windturbines and solar panels to be assembled or
produced locally to receive a code that qualifies
them for local financing. International players withlocal manufacturing operations can also qualify.
Certain developments are making things easierfor the industry, however, including the recent
introduction of US dollar-indexed PPAs and amove to allow project financing in US dollars. Atlas
Renewable Energy is among the first companies toobtain financing in dollars,65 and more renewable
developers are expected to follow suit.
Meanwhile, recent reforms are opening up theelectricity market, as distributed generation isincreasingly commercialized, and residential
customers are set to gain access to a wider variety
of suppliers. Much still needs to be done, though,including a significant expansion of transmission
lines to support new wind and solar farms. In
addition, Brazil’s offshore wind potential isextensive, but the country still needs to establish
legal and regulatory frameworks for developing
this resource.

Chile targets leading role ingreen hydrogen
Chile is among the markets with the largest solar
potential in Latin America, along with Mexico. It
has established a competitive renewables market
with historically very low renewable auction
prices, and now has ambitions to become a world
leader in green hydrogen66 — the cleanest formof hydrogen, which is produced using electrolysis
and renewable energy.
“Chile has made impressive strides toward its
energy transition, with continuous successful
auctions and an ambitious green hydrogentarget,” said Rystad’s Ortega. “The country is
recognizing its exceptional renewable resources
and, unlike some of its peers, Chile is integratingthem into its long-term development plans.”
Green hydrogen has yet to be commercialized, so
developing an industry around it is a long-term
project. However, Chile has a structured plan topursue its development in three waves. The first
involves developing green hydrogen for domestic
use — in the mining sector and transportation,and for the production of ammonia — between
now and 2028. Beyond 2028, in the second andthird waves, it will aim to begin, and then scaleup, green hydrogen and ammonia exports, andincrease production.
Chile believes it has the potential to produce theworld’s cheapest green hydrogen. According to
the Chilean government, it will be able to produce
it at US$1.05 per kilogram by 2030.67 The market
can also expect to benefit from being relatively
attractive for investment compared with otherdeveloping countries as it continues its greenhydrogen plan.
Chile is heavily reliant on imports of fossil fuels
and is currently pursuing a phase-out of coal.
Moving away from fossil fuels is expected to be
costly, and the country will have to take steps toensure security of supply. Chile began taking coalfired power plants offline in 2020 and is aiming

to retire 65% of them by 2025.68 The initial
retirements of coal-fired plants came mid alengthy drought, which led to energy shortages
and highlighted the need to develop, or import,
alternative sources of energy if the coal phaseout takes place as scheduled.
Chile is also an importer of liquefied naturalgas (LNG) and faces increased competition in
the LNG market as Europe ramps up imports ofthe super-chilled fuel. As a result, developing
its renewables industry could become evenmore important to Chile. The major challenge
will be transporting green power from thenorth, where renewable energy is produced,
to the central part of the country, where it
is consumed.

“(Chile) is recognizing its
exceptional renewable
resources and, unlike someof its peers, is integratingthem into its long-term
development plans.
Marcelo Ortega
Renewable Analyst for
the Americas, Rystad Energy

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Regional focus

Argentina seeks to overcome
market risk deterrent
Argentina has significant renewable potential but needs
to overcome the deterrent that heightened market
risk — related to a series of financial crises — poses toinvestors. Against this backdrop, and given a need tobring in US dollars for debt repayment, among otherpurposes, it is trying to attract more foreign direct
investment and diversify its energy mix.
Despite economic volatility and foreign exchange
controls, Argentina’s previous government implemented
a series of programs to champion the renewable sector.
This included the RenovAr program, promoting thedevelopment of renewable generation in Argentina,
particularly from large-scale wind and solar PV projects.
Under the current government, however, priorities havechanged, and these projects have lost momentum.
Argentina’s financial challenges and efforts to attract
investment have been seen as an opportunity by China.
In recent years, 38 Chinese companies are estimated tohave invested US$36b into Argentina,69 including into
renewable energy.
This trend is set to continue, with China expected todominate investment, including broader power sector
investments. In February 2022, China National Nuclear
Corporation signed a contract to build the US$8b
Atucha III NPP in Argentina, reviving a previously
stalled deal.70 Argentina has extensive expertise of
its own in nuclear technology but, unlike other NPPs
developed in the country, Atucha III will be built using
Chinese technology and a Hualong One reactor.

Other challenges for Argentina include a lack of grid
infrastructure,71 which has led to 2GW of capacity
being awarded in renewable auctions but not yet built.
Significant investment in new transmission lines will
also be needed to overcome this challenge.
Hydropower is expected to play a significant role inArgentina’s efforts to decarbonize — the country isaiming to raise the share of non-hydro renewables
in its generation mix to 25% by 2030. While this
could represent a relatively modest 5GW to 8GW of
new capacity, the country’s business environment
could make it challenging to meet both hydro andnon-hydro goals.

Hydropower is expected to play asignificant role in Argentina’s efforts todecarbonize — the country is aiming toraise the share of non-hydro renewables
in its generation mix to 25% by 2030.

Argentina will also need to decide whether it wants to
use its natural gas production domestically or pushahead with plans to export it amid high gas prices andrising demand for LNG. A bidding process is currently
underway for construction of the Néstor Kirchner
pipeline, which aims to increase production from the
Vaca Muerta shale play and gas transportation capacity
for local consumption.
In addition, Argentina has proposed the Law project
for the Promotion of Sustainable Mobility, which
will promote the use of technologies with lessenvironmental impact for mobility. Given the highdependence on oil and gas in mobility, this law seeks
to decrease consumption of hydrocarbons, among
other objectives.

Other notable foreign investors include Australia’s
Fortescue Future Industries, which announced plans
to develop a US$8.4b green hydrogen project inArgentina in November 2021.

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Regional focus

Constitutional reform threatens
Mexican renewables
Like Chile, Mexico has some of the best potential
for solar power — not just in Latin America, but inthe world. It also has considerable wind potential.
However, political and security concerns mean that, todate, renewable infrastructure development has been
uneven, and some renewable-rich states have mademore progress than others.
President Andrés Manuel López Obrador has been
seeking to restore state dominance in the electricity
sector, and his energy reforms represent a significant
threat to the country’s renewable industry,72 despite
their defeat in Congress in mid-April 2022.
Under his proposed constitutional amendment, controlof the power sector would have been returned to staterun utility CFE, with independent energy regulators
also brought back under state control. The proposal
would have resulted in CFE having at least 54% of thepower market.73 On 18 April, however, the lower houseof Congress voted 275–223 in favor of the reform,
falling short of the two-thirds majority required for aconstitutional change.74 Following this setback, López
Obrador pledged to submit legislation to nationalize thecountry’s lithium sector.
Foreign investment in Mexico’s energy sector has
already slowed under López Obrador and will probably
continue to decline, even though the reform failed. The
extent of the proposals is expected to have a continued
impact on perceptions of the market’s attractivenessamong investors, as it signals that López Obrador’s
administration will continue to favor CFE.
Parts of a separate law, passed in 2021, that was
designed to give CFE priority access to the power gridfor its power plants over privately owned renewablegeneration projects were rejected in Mexico’s Supreme
Court in early April. However, a majority of justices
did not find the whole law to be unconstitutional.75
Concerns have been raised, including by US
Ambassador to Mexico Ken Salazar,76 that further
litigation could follow, adding to uncertainty forinvestors in the power sector.

Mexican wind and solar industry associations estimatethat an additional US$10b of investment in renewables
will be required by 2024 to meet the country’s clean
energy goals.77 But with the proposed electricity sector
reforms driving away investment, meeting this target
will be harder.

Other markets to watch
Brazil, Chile, Argentina and Mexico are not the only
markets in Latin America where notable developments
are taking place. Others worth watching include
Colombia, where the free market is expanding, anda mix of private and state-backed renewable energy
auctions have attracted significant investment.
La Guajira is also one of the best locations, globally,for onshore wind.
Colombia is under pressure to reduce its heavy relianceon hydropower after experiencing a lack of rainfall
in recent years. This would have resulted in a power
deficit had it not been for the shutdown of various
industries because of the COVID-19 pandemic. Like
Argentina, it still needs to invest in extensive expansionof its grid, and transmission bottlenecks could result indelays to new renewable capacity coming online.78
Another market where progress has been significant is
Costa Rica, which sources around 98% of its electricity
from renewables. To further minimize its greenhousegas emissions, the country needs to turn its attention
to the transport sector. Its plan for decarbonizing this
sector includes an electric train project, though this has
been struggling with delays,79 and tax exemptions forelectric vehicles (EVs).80 Costa Rica became the firstCentral American country to establish a nationwide EV
charging network in 2020.81
These examples illustrate the different approaches
to decarbonization that Latin American markets aretaking. There is still a long way to go, and obstacles
such as political uncertainty, the need for new
regulatory frameworks, and financing issues will need
to be overcome if the region’s renewables sector is to
grow further.
Latin America has extensive potential, however, andprogress on uptake of renewables can be expectedacross much of the region, this year and beyond.

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Insight

The global search for energy
security: the case for floating
technology
The pressure to build capacity in renewableenergy generation has risen high on to-do
lists, as geopolitical events highlight concerns
around energy security, the cost of powersoars, and the need to decarbonize becomes
ever more pressing.

Renewable energy sources such as wind and solar
are well established, but both require relatively large
areas of land, a resource that is also under pressure.
To mitigate this growth constraint, developers arelooking for alternative locations, with offshore sites ofparticular interest.

There are currently 11 floating offshore wind energy
projects installed around the world, representing
79MW of capacity, but significant growth is alreadyin the pipeline. A further 15 projects, representing
approximately 293MW, are under construction or haveachieved financial close or regulatory approval. Almost
100 more — with a combined capacity of more than
26,000MW — are in the early planning stages.83

The viability of floating wind

While the UK, Norway and South Korea have thehighest capacity already operational, the US has one
project in the pipeline and ambitions for more, as laidout in a 2021 executive order detailing plans for 30GW
of wind power.

Offshore wind power is a relatively established sourceof renewable energy, but there are still significant
constraints on the growth of offshore wind farms. The
typical offshore wind farm requires expensive platforms
in shallow waters with relatively light tidal currents.
Deep water sites would expand the available options
and are usually in places with more wind.

Wind power is currently the source of just 5% of theworld’s electricity, expected to rise to 33% by 2050.
Floating offshore wind is expected to make up 2%of global electricity production — from close to zero
today — but this will depend on industry development
slashing the cost of installation and maintenance.

Increasingly, governments and energy companies are
exploring the concept of floating offshore wind farms.
Stronger and more consistent winds are usually foundaround deeper water, but the cost of fastening turbines
to the seabed becomes prohibitively high beyond acertain depth. With 80% of Europe’s potential offshore
wind power — and 58% of the US’s — in waters deeper
than 60m,82 however, the prize is worth pursuing.

This is a major challenge, but not unprecedented. The
cost of PV solar power plummeted from US$106.09
per watt in 1976 to US$2.04 by 2010 and stood atjust US$0.38 in 2019.84 This was achieved largely
by economies of scale, which led to efficient mass
production reducing prices. Although there may besome efficiencies in the production of kit for floating
wind farms, it is more likely that improvements intechnology will drive down prices.

Global ﬂoating offshore forecast
69.80

GW

2%
7.
3
:
GR
A
C

Currently, the levelized cost of energy from floating
wind stands at around US$200/MWh, and it is expected
to drop to US$70/MWh or lower by 2030.85 Given thatwholesale electricity prices in Europe have fluctuatedaround the €200/MWh (US$217/MWh) mark overthe past year,86 briefly touching a peak of €400/MWh(US$435/MWh) in December, floating wind looks viable
under current pricing conditions, even without further
significant reductions in cost.

33.70

10.67
0.13

0.37

0.85

2020*

2022

2025f

Europe

Asia

2030f

2035f

Getting wind farms to float

2040f

US

Rest of the world

Andrew Perkins

EY Partner, Corporate Finance,
Ernst & Young LLP*Includes projects in operation and under construction.
CAGR: compound annual growth rate.
Source: EY Knowledge analysis of the Floating Wind Joint Industry Project –Phase 2 summary report, Carbon Trust, July 2020, https://www.carbontrust.
com/resources/floating-wind-joint-industry-project-phase-2-summary-report.

Wind turbines are extremely large and must be robust
enough to withstand significant buffeting by wind,rain and salt water, so getting them to float in theright place, reliably, is a major engineering challenge.
Several solutions are in use or on trial but, so far, there
is no consensus on the best-performing or most costeffective way to moor floating wind farms.

Renewable Energy Country Attractiveness Index (RECAI) 59

30

Insight

The main systems currently in use are the spar buoy,with a single, vertical buoyant column to moor theturbine, and the semi-submersible, which links multiple
buoyant columns with pontoons. Although the former isthe simplest, it has to be attached to the turbine in deep
water, which presents a significant challenge. The semisubmersible can be attached to the turbine in relatively
shallow water and towed into place, but having ashallower draft means it may be less stable. The tensionleg platform, which achieves greater stability with its
vertically tensioned tendons, has not yet been tested
fully in operation.
The first floating wind farm to come into operation was
Equinor’s 30MW project Hywind Scotland, which went
online in 2017. The capital expenditure per MW was 70%
lower than it had been in Equinor’s initial experimental
project, and the Norwegian power company says it
expects a further 40% drop in cost for its 88MW Hywind
Tampen project, which is due to start up in the third
quarter of 2022.87
More recently, the 48MW Kincardine floating offshore
wind farm has come into operation, while ScotWind’s
auction earlier this year was oversubscribed, withfloating wind developers securing 11 of 17 leases,
representing 15GW — 50% more than had initiallybeen targeted.
According to Johan Sandberg, Head of Business
Development for Norwegian conglomerate Aker, theindustry is aiming to drive down the price of electricity
from floating offshore to €50/MWh (US$54/MWh),roughly half the current price.

“

The challenge is tobecome really efficient andoptimize design to get thecost compression we areaiming for.
Johan Sandberg
Head of Business Development,
Aker Offshore Wind

“This is a stretch target given commodity prices at
the moment,” said Sandberg. “The challenge is tobecome really efficient and optimize design to get
the cost compression we are aiming for.”88
While mooring systems are the most obvious challenge
for floating wind farms, getting the power from theturbine to the grid is another part of the cycle forwhich improving technology could lower costs.

Floating wind for greenhydrogen production
Offshore floating wind generation would typicallybe used to feed electricity into national grids, butdevelopers are starting to look at other possible
outputs — including hydrogen.
Already widely used in industry, most hydrogen is
produced using fossil fuels. This is known as brownhydrogen if made through the gasification of coal or
lignite, and gray if it is made through steam methane
reformation, which typically uses natural gas as thefeedstock. The latter can also become blue hydrogen
if emissions are cut by using carbon capture andstorage. It will not be possible to capture at least 10%
to 20% of the emissions, however, so blue hydrogencan be a transitional power source at best.
In recent years, there has been increasing interestin green hydrogen,89 produced by using renewableenergy to power the electrolysis of water.
One project in the Celtic Sea plans to combine
electrolysis, desalination and green hydrogenproduction on a floating wind platform. Using
Dolphyn technology from Environmental Resource
Management (ERM), the project — a partnership
between ERM and Source Energie — should comeonline in 2027.90 ERM Dolphyn is also working with
Simply Blue Energy, in partnership with Subsea 7, on
the 200MW Salamander floating wind project off thecoast of Scotland.
They are not the only players in the market.
Norwegian group Aker has announced ambitionsin this area, while Equinor and an alliance ofTotalEnergies and Green Investment Group arealso considering major developments off theScottish coast.

While the ability to produce hydrogen without emissions
is highly attractive, and the process would circumvent
one of the main issues with wind power — that it is notnecessarily produced at convenient times — there arechallenges to be overcome. The technology is untested
in conditions where it must withstand salt corrosion,strong winds and waves, while maintaining a majorindustrial plant, 100 kilometers or more out to sea.
Although floating offshore wind generation has a way
to go before it is competitive with its fixed-bottom andonshore analogues, the industry is poised to accelerate
in the immediate future. Niclas Boberg, Partner,
Strategy & Transactions, Renewables, Ernst & Young
Corporate Finance AB, says: “Most offshore players aretaking the view that floating will happen, and are trying
to position themselves around that.”

Although there may
be some efficiencies
in the production of
kit for floating windfarms, it is more likelythat improvements intechnology will drive
down prices.

Financing floating wind
The cost of capital for these innovative projects
is another obstacle to be overcome, but, again,
the omens are good. Borrowers can expect to
pay around 3% over the risk-free rate to financeonshore wind farms, and about 3.5% for offshore
fixed-bottom wind. Floating wind financing is likely
to attract a spread of 8% over the risk-free rate. As
risk management specialist DNV puts it in a recent
report on the market91:
The business risks come from regulators whoeither do not understand what it takes to scale
new industries by securing stable investment
frameworks, or who set requirements for local
production manufacturing that are too rigid and,
therefore, restrict competition and economies ofscale, leaving the full potential of offshore windtechnology untapped.

So far, all floating wind projects have benefited
from some level of derisking by government-backed
institutions or structures, such as the European
Investment Bank or the UK’s CfD scheme. As the big
players become comfortable with the technology
and its implementation, we are likely to see themtake on some of that risk themselves to achieve alower cost of capital.
Once it has been established, other nonrecourse
financing structures are likely to emerge, withno need for governmental subvention. Kinga
Charpentier, Partner, Strategy & Transactions,
Renewables, Ernst & Young Oy, estimates it will takeanother five to 10 years to make the cost of floating
offshore power finance level with fixed-bottom
offshore wind.

Renewable Energy Country Attractiveness Index (RECAI) 59

32

Insight“Floatovoltaic” gains
momentumWind is not the only renewable energy source taking
to the water. Given how cheap PV panels havebecome, developers are looking for new areas inwhich to deploy the technology.
In places with calm, shallow waters and long hours ofsunshine, floating solar farms are a real option andincreasingly popular, with global capacity growing
more than 100-fold in the five years to 2021.
It is attractive for markets such as Singapore, which
has little available land but needs to find carbonfree energy sources. The island state recently
opened a 60MW solar farm on its Tengeh Reservoir,in addition to the 5MW farm in the Johor Strait
between Singapore and Indonesia.
Floating solar bypasses many of the objections tosolar farms on land, where energy production has tocompete with food production and amenity value, but
it is not trouble-free. It is susceptible to capsizing,as in the case of the Ocean Sun Statkraft project inAlbania, which suffered tornado damage within daysof its commissioning in 2021. The floating platform
has since been repaired and is now touted to be readyto withstand the weather for the next 50 years.
Placing a solar plant on bodies of water can also becontroversial where those bodies are lakes in areasof outstanding natural beauty and, hence, a sourceof tourist revenue. In addition, there are questions
around the impact on ecological systems. There issome evidence92 that the cooling effect of solar farms
may offset the damaging impact of heating, slowing
algae overgrowth, but there is not yet sufficient data
to know if this is meaningful.
So far, most “floatovoltaic” projects are on manmade, freshwater bodies, where the environmentis relatively controlled, but there are plans tomove further offshore to exploit the vastly larger
resources of open sea.

Norwegian research institute SINTEF has been
conducting a study93 to examine the viability of offshore
floating solar farms. A model in a marine basin has
yielded sufficient information that researchers believe
they can develop technology that will result in offshore
solar farms competing with other power sources.
So far, however, the likely potential for floating solaris dwarfed by that of floating wind, where massive
acceleration of the industry is already taking place.
Nevertheless, the soaring demand for new sources ofrenewable energy will drive research and innovation
across all sectors. Floating wind is likely to become
mainstream for investors in a few years, while
engineers are working to establish whether floating
solar will be more than a niche area. Even tidal power94
and wave power,95 often written off as unworkable interms of efficiency, are receiving renewed interest (andresearch funding) in the hunt for oceanic energy.

While the ability to
produce hydrogen without
emissions is highly
attractive, and the process
would circumvent oneof the main issues withwind power — that it is
not necessarily produced
at convenient times —there are challenges tobe overcome.

Renewable Energy Country Attractiveness Index (RECAI) 59

34

Data and methodology

RECAI 59 scores
Rank

Previousrank

1

Movement on
previous index

Technology-specific scores
MarketScore

Onshorewind

OfffshorewindSolar PV

Solar CSP

Biomass

Geothermal

Hydro

Marine

1

US

74.2

58.8

60.2

58.8

47.0

30.1

47.0

40.7

21.2

2

2

China Mainland

71.4

54.7

58.6

60.7

55.5

50.9

25.3

51.6

17.7

3

5

UK

70.2

58.7

62.7

48.7

15.5

56.3

36.1

39.7

36.3

4

6

Germany

69.6

54.3

52.0

53.4

17.5

50.9

38.6

35.1

20.7

5

4

France

69.5

55.6

53.6

54.2

23.5

47.6

39.9

41.8

38.9

6

7

Australia

69.1

54.3

33.5

57.8

49.0

40.9

17.8

26.7

26.1

7

3

India

68.6

51.6

24.9

63.0

34.6

46.3

30.7

45.7

20.7

8

8

Japan

66.3

50.4

50.3

50.4

19.6

56.9

44.1

40.4

23.6

9

10

Spain

64.4

49.2

34.4

51.5

29.0

39.8

15.6

25.2

23.5

10

11

Netherlands

64.3

52.2

49.8

46.8

15.7

49.6

22.1

25.0

24.3

11

15

Denmark

62.4

53.2

50.2

44.6

16.0

45.4

15.0

20.8

20.7

12

14

Ireland

62.3

51.0

40.0

45.6

19.5

26.8

17.7

23.3

24.9

13

9

Brazil

62.2

54.2

28.7

52.4

25.6

48.3

13.1

44.3

18.8

14

12

Chile

62.0

51.7

20.5

49.2

53.5

43.0

45.5

45.6

27.8

15

13

Italy

61.9

45.7

40.6

48.6

31.8

42.4

32.5

44.5

18.7

16

18

Canada

61.2

54.2

35.0

45.4

18.9

32.6

25.7

47.0

27.1

17

20

Sweden

59.4

49.5

40.9

42.1

15.2

43.9

17.7

32.8

26.7

18

17

Israel

59.3

39.8

15.1

54.8

40.7

30.1

14.5

17.5

14.9

19

22

Poland

59.3

44.6

40.1

48.0

13.4

44.7

17.4

32.5

14.2

20

16

Morocco

59.2

45.4

17.8

50.4

51.2

26.3

14.3

32.9

14.3

Renewable Energy Country Attractiveness Index (RECAI) 59

36

Data and methodology

Technology-specific scores
Rank

Previousrank

21

Movement on
previous index

MarketScore

Onshorewind

OfffshorewindSolar PV

Solar CSP

Biomass

Geothermal

Hydro

Marine24

Greece

58.9

49.2

23.5

46.4

35.2

45.5

28.0

41.0

14.2

22

21

South Korea

58.3

39.6

32.2

50.5

18.4

48.8

14.3

34.0

33.9

23

23

Portugal

58.3

42.5

24.6

47.1

26.1

38.1

23.2

36.3

24.4

24

31

Finland

58.2

59.8

31.9

34.0

15.4

50.5

15.4

22.8

15.4

25

28

Turkey

58.2

48.1

22.1

48.8

29.9

39.3

43.2

43.4

20.7

26

19

Egypt

57.5

46.0

16.2

54.4

48.8

25.4

12.0

23.6

12.0

27

25

Argentina

57.5

49.6

23.7

49.2

32.0

37.4

15.6

31.7

19.6

28

27

Philippines

57.1

42.2

22.8

48.1

20.2

43.1

42.8

40.8

20.7

29

26

Belgium

56.7

48.4

27.7

41.5

18.0

42.3

20.0

21.4

14.8

30

29

Vietnam

56.2

44.8

44.1

47.4

16.6

39.1

12.9

46.6

17.1

31

30

Taiwan

55.1

39.3

45.5

45.0

17.4

34.7

27.6

32.7

19.3

32

33

Mexico

54.8

42.8

19.4

47.5

24.2

36.0

42.0

29.6

19.2

33

35

Switzerland

54.8

40.3

18.4

43.4

18.3

37.6

22.3

37.9

15.2

34

32

Norway

54.6

48.8

39.9

37.6

13.8

31.7

16.3

45.3

31.9

35

34

South Africa

54.3

46.4

17.7

47.1

44.6

31.6

12.0

25.1

20.3

36

36

Kazakhstan

53.3

46.0

13.5

44.8

17.4

29.2

14.3

39.1

13.0

37

44

Austria

52.9

43.6

15.7

40.7

13.5

38.6

17.0

36.0

13.5

38

45

Thailand

52.5

36.3

15.4

46.4

19.9

39.2

13.8

27.0

18.3

39

38

Jordan

52.4

40.0

14.3

44.4

30.8

20.6

13.8

16.0

13.8

40

43

Saudi Arabia

51.8

42.7

15.4

45.7

44.6

25.8

15.1

11.4

11.0

Renewable Energy Country Attractiveness Index (RECAI) 59

38

Data and methodology

RECAI methodology
The index rankings reflect our assessment of the factors driving
market attractiveness in a world where renewable energy has
gone beyond decarbonization and reliance on subsidies.
We have defined the questions being asked,
based on what we see as global market
trends affecting investment and deployment
priorities, and the challenges and successfactors impacting EY clients:• I● s there a long-term need for additional or
replacement energy supply? If so, is therea strong case for energy from renewable
resources in particular?
• I● s policy hindering or helping the ability to
exploit renewables opportunities?
• A● re essential components in place toensure project delivery, such as long-term
contracts, grid infrastructure (including
storage) and availability of finance?
• W● hat does the strength of natural resource,
track record and project pipeline reveal
about the outlook for particular renewable
technologies?
• E● ven if all other elements are in place,does the macro stability and investment
climate enable or impede the ease of
doing business?
These index pillars therefore put emphasis
on fundamentals such as energy imperative,
policy stability, project delivery (including
capital availability) and diversity of natural
resource — factors that will increasingly become
key market differentiators as markets movetoward grid parity, and “artificial” motivations,such as government targets or the ring-fencing
of technologies, become less critical.

Determining the rankings
Each parameter within the five pillars
comprises a series of data sets that areconverted into a score, from one to five, andweighted to generate parameter scores. These
are weighted again to produce pillar scores,
then an overall RECAI score and ranking.
Weightings are based on the EY assessmentof the relative importance of each data set,parameter and pillar in driving investment anddeployment decisions. Each technology is also
allocated a weighting based on its share ofhistorical and projected investment levels.
Separate from the main index, EY technologyspecific indices rankings reflect a weighted
average score across the technology-specificparameters and a combined score covering ourother macro and energy market parameters.
This is because some markets may be highly
attractive for specific technologies but faceother major barriers to entry.
Data sets are based on publicly available orpurchased data, EY analysis or adjustments
to third-party data. We are unable to publicly
disclose the underlying data sets or weightings
used to produce the indices.
If you would like to discuss how the EY RECAI
analysis could help your business decisions
or transactions, please contact the report’s
advisor Lavaanya Rekhi (lrekhi@uk.ey.com).

Renewable Energy Country Attractiveness Index (RECAI) 59

40

Data and methodology

PPA Index scores
Normalized
score (0-100)

PPA Index
score

PPA market
maturity

PPA future
market score

PPA policy
score

RECAI
score

1

100.0

24,333,692

82.8

87.0

52.5

64.4

US

2

99.9

24,320,944

100.0

56.6

57.9

74.2

3

Germany

4

95.2

23,173,497

72.2

85.7

53.9

69.6

4

UK

7

83.1

20,222,447

68.1

78.0

54.3

70.2

5

Australia

5

73.5

17,890,097

82.9

53.7

58.1

69.1

6

France3

70.0

17,028,450

58.6

79.4

52.6

69.5

7

Sweden10

64.7

15,742,550

65.2

80.0

50.8

59.4

8

Finland

11

57.2

13,930,131

67.5

66.9

53.0

58.2

9

Netherlands

8

55.8

13,570,416

55.7

71.5

53.0

64.3

10

Denmark

16

52.9

12,860,817

50.9

81.4

49.8

62.4

11

Italy

9

48.7

11,853,238

44.6

81.0

53.1

61.9

12

Poland12

45.3

11,027,156

56.7

57.0

57.6

59.3

13

Brazil15

44.0

10,699,624

72.8

54.6

43.2

62.2

14

India

6

39.7

9,664,614

46.5

50.3

60.2

68.6

15

Norway13

36.4

8,852,661

58.3

56.5

49.3

54.6

16

Chile

14

27.3

6,650,102

51.4

39.0

53.4

62.0

17

Portugal

22

24.4

5,933,104

30.3

64.5

52.1

58.3

18

Morocco20

21.7

5,270,523

42.6

35.9

58.3

59.2

19

Belgium

17

20.9

5,079,762

54.4

31.6

52.1

56.7

20

South Africa

28

20.4

4,957,846

40.7

41.2

54.5

54.3

21

Colombia

19

20.0

4,856,557

53.4

38.9

48.8

47.9

22

Ireland18

17.0

4,130,587

34.1

35.0

55.6

62.3

23

Thailand29

15.3

3,719,297

43.1

28.8

57.0

52.5

24

Greece23

12.0

2,910,371

28.3

34.5

50.5

58.9

25

Ethiopia

24

10.6

2,578,693

38.3

33.7

48.8

41.0

26

Egypt

21

9.8

2,394,253

20.5

38.4

52.8

57.5

27

Romania

9.2

2,232,690

29.0

30.4

52.7

48.0

28

Japan

8.9

2,176,651

12.7

47.8

53.9

66.3

29

Lithuania

27

8.6

2,096,734

34.8

33.7

52.0

34.3

30

Mozambique

26

6.3

1,539,919

36.7

31.5

56.8

23.4

Rank

MarketPrevious rank

1

Spain

2

Movement on
previous index

Renewable Energy Country Attractiveness Index (RECAI) 59

42

Data and methodology

PPA Index
methodology
By analyzing the same 100 markets
as in the full RECAI database, wehave created a ranking that focuseson the attractiveness of renewable
power procurement — via offsite
corporate PPAs — rather than
the attractiveness of renewableproject investment.

The final score for the top 30 markets is
calculated from a weighted combination of
12 key parameters, which act as a proxy forcorporate PPA potential. The PPA Index focuses
on four pillars (three PPA-specific pillars
together with a RECAI score pillar):• PPA market maturity — this focuses on
activities carried out within each market
in the past decade. The assessment
concentrates on market maturity, looking at
past PPA deal frequency and volume, as well
as a quantitative analysis of more recent PPA
deal growth.
• PPA future market — this forward-looking
score assesses the forecast activity of eachmarket. Forecast power capacity is a key
driver of the magnitude of a market, so thishas a significant weighting on the score aswell as the wholesale power price relative tothe levelized cost of energy (LCOE) or PPA
price in each location. Forecast capacity
installations and a weighted project pipeline
score from the RECAI are used. The index has
focused on wind and solar PPAs (together
weighted at 93%) as these represent the vast
majority of offsite corporate PPAs.

• PPA policy score — this focuses on the easeof operation in a given market. If a market is
to have potential for corporate PPA growth,
supporting government policy must be inplace for efficient and large-scale expansion.
This is considered in the core RECAI, but isalso examined here, with a more nuanced
focus on PPA supportive policy.
• RECAI score — the overall score yielded by
the RECAI is also factored in as one of thefundamental pillars, because this provides astrong overview of the existing and potential
strength of a market’s renewable energy
landscape.
The PPA Index utilizes a multiplicative formulain order to prioritize well-rounded markets
with strengths in all aspects of corporate PPA
development and integration. For example,
this will mean that markets with zero PPA
deals to date will score zero overall and will
not yet be included.
However, with strong weighting on forwardlooking parameters, even markets with justa few deals to date could score highly if
significant growth is expected in the corporate

PPA market within the next five years — thehorizon of the RECAI.
The PPA Index score (which can be very large)
has been normalized into a score from 0 to100, in order to create a more manageablereference value. The leading market will score
100 — but this does not mean that the market
is perfect for corporate PPAs. It means that,
relatively speaking, it is the most attractive
market for corporate PPAs across thecoming five years.
Data sets are based on publicly available orpurchased data, EY analysis or adjustments
to third-party data. We are unable to publicly
disclose the exact data sets or weightings used
to produce the indices.
For a more extensive discussion of the drivers
and the barriers in the corporate PPA market
or for more information on the services that
EY teams provide corporates around renewableenergy strategies and PPAs, please refer toour website: www.ey.com/uk/ppa or contact
the report’s senior advisor Phil Dominy(pdominy@uk.ey.com).

Renewable Energy Country Attractiveness Index (RECAI) 59

03
44

Data and methodology

PPA market maturity

PPA future market

PPA policy score

RECAI score(Sources: Pexapark, DLA Piper andEY analysis)(Sources: Wood Mackenzie, GlobalData,
IRENA, IEA, Pexapark and EY analysis)(Source: World Bank, GlobalData, IEA
and EY analysis)(Source: EY analysis)

1. Number of PPAs signed in thepast five years

1. Pipeline of projects:

2. Energy imperativea. Forecast power capacity

1. Ease of doing business index(World Bank)b. Forecast installation growth

2. Renewable energy imperative:

4. Project delivery

2. Total PPA volume in the past fiveyears
3. Number of PPAs signed in thepast year
4. Total PPA volume in the past yearc. Project pipeline
2. Wholesale power pricing:• Renewable energy percentage of
total generationa. Wholesale power price relative
to the historic LCOE• Percentage of population withaccess to electricity

b. Wholesale power
price relative
to the PPA price• Forecast energy consumption
growth

1. Macro fundamentals
3. Policy
5. Technology• CO2 emissions

Special thanks to Pexapark for providing access to their data.

Renewable Energy Country Attractiveness Index (RECAI) 59

03
46

Contacts

Ben Warren

Arnaud de Giovanni

Anthony Tricot

Fernando Machado

André Flávio

RECAI Chief Editor
EY Global Power & Utilities
Corporate Finance Leader

EY Global Power & Utilities
Strategy & Transactions Leader

EY UK&I Head of Generation
and Power Markets,
Economic Consulting
atricot@uk.ey.com

Partner, Strategy and Transactions,
Infrastructure Capital and Debt Advisory
Ernst & Young Assessoria
Empresarial Ltda

Executive Director, Business Consulting,P&U and Construction Industry
Ernst & Young Assessoria
Empresarial Ltda

fernando.machado@br.ey.com

andre.flavio@br.ey.com

bwarren@uk.ey.com

arnaud.de.giovanni@fr.ey.com

Andrew Perkins

Phil Dominy

Lavaanya Rekhi

Nathan Docker

Andrew Hill

Partner, Corporate Finance
Ernst & Young LLP

Senior RECAI Advisor
Ernst & Young LLP
pdominy@uk.ey.com

RECAI Advisor

EY UK&I Energy and Infrastructure
Corporate Finance Executive

EY UK&I Energy and Infrastructure
Corporate Finance Executive

nathan.docker@uk.ey.com

andrew.hill@uk.ey.com

aperkins@uk.ey.com

Ernst & Young LLP
lrekhi@uk.ey.com

Renewable Energy Country Attractiveness Index (RECAI) 59

48

Citations

References	How investors can catch the next wave of offshore wind potential”, webcast, EY website, www.ey.com/en_gl/
webcasts/2022/04/how-investors-can-catch-the-next-wave-of-offshore-wind-potential, 12 April 2022.
2
	“Average monthly electricity wholesale prices in selected countries in the European Union (EU) from January
2020 to February 2022”, Statista website, www.statista.com/statistics/1267500, 10 March 2022.
3
	“Wind energy – going offshore”, DNV Technology Outlook 2030, DNV website, www.dnv.com/to2030/
technology/wind-energy-going-offshore.html.
4	“AstraZeneca, Future Biogas to build biomethane facility”, Bioenergy Insight website, www.bioenergy-news.com/
news/astrazeneca-future-biogas-to-build-biomethane-facility, 14 December 2021.
5
	“John Lewis to install biomethane filling station at head office”, Commercial Fleet website, www.commercialfleet.
org/news/latest-news/2020/06/18/john-lewis-to-install-biomethane-filling-station-at-head-office, 18 June 2020.
6	
Chile’s green hydrogen strategy and investment opportunities, Government of Chile, June 2021, energia.gob.cl/sites/default/files/documentos/green_h2_strategy_chile.pdf.
7	“DOE to deploy USD 10bn in clean hydrogen funding”, Inframation website, www.inframationnews.com,
15 February 2022.
8	“‘Keeps up momentum’: US raises sails for Carolinian offshore wind with giga-scale lease”, Recharge website,www.rechargenews.com/wind/keeps-up-momentum-us-raises-sails-for-carolinian-offshore-wind-with-giga-scalelease/2-1-1191417, 25 March 2022.
9	“Biden proposes boosting clean energy infrastructure spending”, Inframation website, www.inframationnews.
com, 28 March 2022.
10
	“Chinese president says geothermal and hydrogen are priority sectors”, Inframation website,www.inframationnews.com, 26 January 2022.
11
	“China publishes plan to promote renewables in rural areas”, Inframation website, www.inframationnews.com,
6 January 2022.
12
	“T-4 capacity market clears at record high of £30.59/kW/year marking ‘watershed moment’”, Current News
website, www.current-news.co.uk/news/t-4-capacity-market-clears-at-record-high-of-30-59-kw-year-markingwatershed-moment, 23 February 2022.
13
	“ScotWind offshore wind leasing delivers major boost to Scotland’s net-zero aspirations” Crown Estate Scotland
website, www.crownestatescotland.com/news/scotwind-offshore-wind-leasing-delivers-major-boost-to-scotlandsnet-zero-aspirations, 17 January 2022.
14
	“UK opens biggest ever contracts for difference round, Offshore Energy website, www.offshore-energy.biz/ukopens-biggest-ever-contracts-for-difference-round, 13 December 2021.
15
	“Germany brings forward goal of 100% renewable power to 2035, Bloomberg website, www.bloomberg.com/
news/articles/2022-02-28/germany-brings-forward-goal-of-100-renewable-energy-to-2035, 28 February 2022.
16
	“Germany boosts clean energy target to 80% from 65% by 2030”, Electrek website, electrek.co/2022/04/06/
germany-boosts-clean-energy-target-to-80-from-65-by-2030, 6 April 2022.
17
	“Prices rise in German tender for rooftop solar”, Renewables Now website, renewablesnow.com/news/prices-risein-german-tender-for-rooftop-solar-769446, 17 January 2022.
18
	“Germany awards 1.33GW in latest onshore auction” renews.biz website, renews.biz/76308/germany-awardsover-13gw-in-latest-onshore-auction, 11 March 2022.
19	“Ministry of Power notifies green hydrogen/green ammonia policy”, Government of India website, www.pib.gov.
in/PressReleasePage.aspx?PRID=1799067, 17 February 2022.
20
	“We are aiming for green hydrogen cost of $1 per kg by 2030: Amitabh Kant”, Energyworld website, energy.
economictimes.indiatimes.com/news/renewable/we-are-aiming-for-green-hydrogen-cost-of-1-per-kg-by-2030amitabh-kant/89974517, 3 March 2022.
21
	“UAE, India issue joint vision statement”, Emirates News Agency website, www.wam.ae/en/
details/1395303022276, 18 February 2022.
22
	“Italy plans first major floating offshore wind tenders”, Inframation website, www.inframationnews.com,
17 March 2022.
23
	“The Mediterranean’s first offshore wind farm, off Italy, is now up and running, Electrek website, electrek.
co/2022/04/22/the-mediterraneans-first-offshore-wind-farm-off-italy-is-nearly-halfway-complete, 22 April 2022.
1

	“Italy awards 975MW of solar, onshore wind in 7th tender, Renewables Now website, renewablesnow.com/news/
italy-awards-975-mw-of-solar-onshore-wind-in-7th-tender-771333, 31 January 2022.
25
	“Italy launches 3.35GW renewables tender, renews.biz website, renews.biz/75307/italy-launches-335gwrenewables-tender, 31 January 2022.
26	“South Korea raises renewables standard”, Argus Media website, www.argusmedia.com/en/news/2287102south-korea-raises-renewables-standard, 28 December 2021.
27
	“South Korea joins global methane pledge”, Argus Media website, www.argusmedia.com/en/news/2269498south-korea-joins-global-methane-pledge, 1 November 2021.
28	“South Korea goes large on offshore wind”, en:former website, www.en-former.com/en/south-korea-goes-largeon-offshore-wind, 28 February 2022.
29
	“South Korea unveils plan for 6GW floating wind power complex”, Renewables Now website, renewablesnow.
com/news/south-korea-unveils-plan-for-6-gw-floating-wind-power-complex-740345, 7 May 2021.
30
	“South Korean authorities to spend $157m subsidizing ‘world’s largest ever order’ for hydrogen buses, Recharge
website, www.rechargenews.com/energy-transition/south-korean-authorities-to-spend-157m-subsidising-worldslargest-ever-order-for-hydrogen-buses/2-1-1149098, 20 January 2022.
31
	“Turkey earmarks 2.8GW grid capacity for renewables tender”, Inframation website, www.inframationnews.com,
11 March 2022.
32
	“Turkey holds 75 gigawatts of offshore wind energy potential, Daily Sabah website, www.dailysabah.com/
business/energy/turkey-holds-75-gigawatts-of-offshore-wind-energy-potential, 19 April 2021.
33
Global Wind Report 2022, Global Wind Energy Council, 2022, gwec.net/global-wind-report-2022.
34
	“Philippines to seek bids for 2GW renewables capacity”, Inframation website, www.inframationnews.com,
26 January 2022.
35
	“New RE plan targets 35% share of power generation by 2030”, Philippine News Agency website, www.pna.gov.
ph/articles/1159659, 13 November 2021.
36
	“South Africa picks bids for $3 billion of renewable projects”, Bloomberg website, www.bloomberg.com/news/
articles/2021-10-28/south-africa-selects-25-wind-and-solar-renewable-power-projects, 28 October 2021.
37
	“South Africa: authorities turn to renewable energy to deal with load shedding, Africanews website, www.
africanews.com/2021/12/16/south-africa-authorities-turn-to-renewable-energy-to-deal-with-load-shedding, 16
December 2021.
38
	“Cape Town to procure 300MW of renewables from IPPs”, Renewables Now website, renewablesnow.com/news/
cape-town-to-procure-300-mw-of-renewables-from-ipps-773905, 18 February 2022.
39“Natural gas”, US Energy Information Administration website, www.eia.gov/dnav/ng/hist/rngwhhdD.htm.
40
	“REPowerEU: joint European action for more affordable, secure and sustainable energy”, European Commission
website, ec.europa.eu/commission/presscorner/detail/en/ip_22_1511, 8 March 2022.
41
	“UK to phase out Russian oil imports”, Gov.uk website, www.gov.uk/government/news/uk-to-phase-out-russianoil-imports, 8 March 2022.
42
	“Major acceleration of homegrown power in Britain’s plan for greater energy independence”, Gov.uk website,www.gov.uk/government/news/major-acceleration-of-homegrown-power-in-britains-plan-for-greater-energyindependence, 6 April 2022.
43
“Russia’s war is turbocharging the world’s addiction to coal”, Bloomberg website, www.bloomberg.com/news/
articles/2022-04-25/coal-prices-soar-as-russia-war-energy-crisis-risk-global-climate-goals, 25 April 2022.
44
	“How Europe can cut natural gas imports from Russia significantly within a year”, International Energy Agency(IEA) website, www.iea.org/news/how-europe-can-cut-natural-gas-imports-from-russia-significantly-within-ayear, 3 March 2020.
45
	“Poland to cut all Russian oil imports while Germany warns on gas supplies”, NPR website, https://www.npr.
org/2022/03/30/1089630421/germany-triggers-warning-over-gas-amid-russian-ruble-demand,
30 March 2022.
46
	“EU slashes 10% of Russian imports with new sweeping sanctions”, Reuters website, www.reuters.com/world/
europe/eu-adopts-new-sanctions-against-russia-including-coal-import-ban-2022-04-08, 8 April 2022.
24

Renewable Energy Country Attractiveness Index (RECAI) 59

50

Citations

	“Germany rejects Putin’s demand for gas payments in rubles”, Bloomberg website, www.bloomberg.com/news/
articles/2022-04-20/germany-rejects-putin-demand-for-ruble-payments-for-gas-exports, 20 April 2022.
48
	“Fact sheet: United States and European Commission announce task force to reduce Europe’s dependence
on Russian fossil fuels”, The White House website, www.whitehouse.gov/briefing-room/statementsreleases/2022/03/25/fact-sheet-united-states-and-european-commission-announce-task-force-to-reduceeuropes-dependence-on-russian-fossil-fuels, 25 March 2022.
49
	EU-US LNG Trade: US liquefied natural gas (LNG) has the potential to help match EU gas needs, European
Commission, 2022, ec.europa.eu/energy/sites/ener/files/eu-us_lng_trade_folder.pdf.
50
	“EU countries bet on floating LNG terminals to raise import capacity”, Euractiv website, www.euractiv.com/
section/energy/news/eu-countries-bet-on-floating-lng-terminals-to-raise-import-capacity, 31 March 2022.
51
	“Statement by QatarEnergy on LNG supplies to Germany”, QatarEnergy website, https:/www.qatarenergy.qa/en/
MediaCenter/Pages/newsdetails.aspx?ItemId=3704, 20 March 2022.
52
	“Italy clinches gas deal with Algeria to temper Russian reliance”, Reuters website, www.reuters.com/business/
energy/italy-signs-deal-with-algeria-increase-gas-imports-2022-04-11, 11 April 2022.
53
	“Eni and EGAS agree to increase Egypt’s gas production and supply”, Eni website, www.eni.com/en-IT/media/
press-release/2022/04/eni-and-egas-agree-increase-egypt-s-gas-production-and-supply.html, 13 April 2022.
54
	“New measures to maintain high gas exports to Europe”, Equinor website, www.equinor.com/en/news/archive/20220306-new-measures-maintain-high-gas-exports-europe, 16 March 2022.
55
	“Norway plans for more gas and blue hydrogen as Europe turns away from Russia”, Upstream website, www.
upstreamonline.com/production/norway-plans-for-more-gas-and-blue-hydrogen-as-europe-turns-away-fromrussia/2-1-1196177, 7 April 2022.
56
	“Major acceleration of homegrown power in Britain’s plan for greater energy independence”, Gov.uk website,www.gov.uk/government/news/major-acceleration-of-homegrown-power-in-britains-plan-for-greater-energyindependence, 6 April 2022.
57
	“Fortum submits the Loviisa nuclear power plant operating licence application to the government”, Fortum
website, www.fortum.com/media/2022/03/fortum-submits-loviisa-nuclear-power-plant-operating-licenceapplication-government, 18 March 2022.
58
	“Nuclear energy: Belgium postpones phase-out by 10 years due to Ukraine war”, Euronews website,www.euronews.com/2022/03/19/nuclear-energy-belgium-postpones-phase-out-by-10-years-due-to-ukrainewar, 19 March 2022.
59
	“Germany vetoes nuclear power extension, aims for LNG terminal in 2024”, Reuters website, www.reuters.com/
world/europe/german-ministries-say-cannot-recommend-extending-nuclear-plants-lifetime-2022-03-08,
8 March 2022.
60
	“Renewable energy strategy and power purchase agreements”, EY website, www.ey.com/en_uk/power-utilities/
renewable-energy-strategy-and-power-purchase-agreements.
61
	“Germany unveils plans to accelerate green energy expansion”, Reuters website, www.reuters.com/world/
europe/germany-present-renewable-energy-expansion-measures-2022-04-05, 6 April 2022.
62
	“EU could revisit renewable targets in push to quit Russian energy, climate policy chief says”, Reuters
website, www.reuters.com/business/energy/eu-could-revisit-renewable-targets-push-quit-russian-energytimmermans-2022-04-10, 10 April 2022.
63
Renewable energy capacity forecasts, GlobalData website, power.globaldata.com/, accessed 9 May 2022.
64
Renewable energy capacity forecasts, GlobalData website, power.globaldata.com/, accessed 9 May 2022.
65
	“Atlas renewable energy executes its 2nd USD finance project in Brazil’s renewable sector with IDB invest and
DNB Bank, Atlas Renewable Energy website, www.atlasrenewableenergy.com/en/atlas-renewable-energyexecutes-its-2nd-usd-finance-project-in-brazils-renewable-sector-with-idb-invest-and-dnb-bank.
66
	Chile’s green hydrogen strategy and investment opportunities, Government of Chile, June 2021, energia.gob.cl/sites/default/files/documentos/green_h2_strategy_chile.pdf.
67	Chile’s green hydrogen strategy and investment opportunities, Government of Chile, June 2021, energia.gob.cl/sites/default/files/documentos/green_h2_strategy_chile.pdf.
68	“Chile announces that it will work to put an end to coal use by 2030 after joining the Powering Past Coal
Alliance”, Government of Chile website, www.gob.cl/en/news/chile-announces-it-will-work-put-end-coal-use2030-after-joining-powering-past-coal-alliance/, 5 November 2021.
69
	“Interview: Chinese investment in Argentina a boost to community development”, Xinhuanet website, english.
news.cn/20220222/397d9dfa21fd4cfb88540cb554b3912e/c.html, 22 February 2022.
47

	“China inks $8 bln nuclear power plant deal in Argentina”, Reuters website, www.reuters.com/business/energy/
china-inks-nuclear-power-plant-deal-with-argentina-2022-02-02, 2 February 2022.
71	Latin America Power & Renewables: 5 key things to look for in 2022, Wood Mackenzie, 2022.
72
Latin America Power & Renewables: 5 key things to look for in 2022, Wood Mackenzie, 2022.
73
	“Mexico’s energy reforms: a blow to realizing the most competitive and dynamic region in the world”, Brookings
website, www.brookings.edu/blog/up-front/2022/02/28/mexicos-energy-reforms-a-blow-to-realizing-the-mostcompetitive-and-dynamic-region-in-the-world, 28 February 2022.
74
	“Mexican president’s radical energy reform defeated in congress”, Financial Times website, www.ft.com/
content/728da54c-d2c5-43ee-9943-c3e22bb43bb0.
75
	“Mexico Supreme Court rejects only parts of AMLO’s electricity law”, Bloomberg website, www.bloomberg.com/
news/articles/2022-04-07/mexico-supreme-court-delivers-partial-ruling-on-amlo-s-power-law, 7 April 2022.
76
	“Statement from Ambassador Salazar on Mexican Supreme Court decision on electricity industry law”, US
Embassy & Consulates in Mexico website, mx.usembassy.gov/statement-from-ambassador-salazar-on-mexicansupreme-court-decision-on-electricity-industry-law, 7 April 2022.
77
	“Mexican green energy investment drying up, trade groups warn”, Bloomberg website, www.bloomberg.com/
news/articles/2022-01-26/investment-in-mexican-green-energy-drying-up-trade-groups-warn,
26 January 2022.
78
Latin America Power & Renewables: 5 key things to look for in 2022, Wood Mackenzie, 2022.
79	“Costa Rica seeks firm to design US$450mn electric freight line”, bnamericas website, www.bnamericas.com/en/
news/costa-rica-seeks-firm-to-design-us450mn-electric-freight-line, 7 January 2022.
80
	“Electric cars will have tax exemptions for 12 more years”, Qcostarica website, qcostarica.com/electric-cars-willhave-tax-exemptions-for-12-more-years, 7 April 2022.
81	“Costa Rica says it’s the first country in the region with nationwide electric vehicle charging gird”, The Tico
Times website, ticotimes.net/2020/02/27/costa-rica-says-its-the-first-country-in-the-region-with-nationwideelectric-vehicle-charging-grid, 27 February 2020.
82
	Floating offshore wind vision statement June 2017, Wind Europe, 2017, windeurope.org/wp-content/uploads/
files/about-wind/reports/Floating-offshore-statement.pdf.
83
	“How investors can catch the next wave of offshore wind potential”, webcast, EY website, www.ey.com/en_gl/
webcasts/2022/04/how-investors-can-catch-the-next-wave-of-offshore-wind-potential, 12 April 2022.
84
	“Solar PV module prices”, Our World in Data website, ourworldindata.org/grapher/solar-pv-prices.
85	“Wind energy – going offshore, DNV Technology Outlook 2030, DNV website, www.dnv.com/to2030/technology/
wind-energy-going-offshore.html.
86	“Average monthly electricity wholesale prices in selected countries in the European Union (EU) from January
2020 to February 2022”, Statista website, www.statista.com/statistics/1267500, 10 March 2022.
87	“Hywind Tampen: the world’s first renewable power for offshore oil and gas”, Equinor website, www.equinor.com/
energy/hywind-tampen.
88
	“How investors can catch the next wave of offshore wind potential”, webcast, EY website, www.ey.com/en_gl/
webcasts/2022/04/how-investors-can-catch-the-next-wave-of-offshore-wind-potential, 12 April 2022.
89	“How green hydrogen can spark the next zero-emissions revolution”, EY website, www.ey.com/en_gl/strategy/
how-hydrogen-can-spark-the-next-zero-emissions-revolution, 23 April 2021.
90
	ERM Dolphyn and Source Energie announce plans to develop gigawatt-scale ‘green hydrogen’ floating windsites in the Celtic Sea, ERM website, www.erm.com/news/erm-dolphyn-and-source-energie-announce-plans-todevelop-gigawatt-scale-green-hydrogen-floating-wind-sites-in-the-celtic-sea, 23 March 2022.
91	“Wind energy – going offshore, DNV Technology Outlook 2030, DNV website, www.dnv.com/to2030/technology/
wind-energy-going-offshore.html.
92	“Floating solar farms could cool down lakes threatened by climate change”, World Economic Forum website,www.weforum.org/agenda/2021/04/floating-solar-farms-lakes-threatened-climate-change, 16 April 2021.
93	“Researchers to test a solar farm at sea”, Norwegian SciTech News website, norwegianscitechnews.
com/2021/06/researchers-to-test-a-solar-farm-at-sea, 1 June 2021.
94	“ÉireComposites and ORPC announce initiative to harness tidal energy”, ÉireComposites website,www.eirecomposites.com/crimson.
95
	“Wave energy: can ocean power solve the global energy crisis?”, World Economic Forum website,www.weforum.org/agenda/2022/03/wave-energy-ocean-electricity-renewables, 22 March 2022.
70

Renewable Energy Country Attractiveness Index (RECAI) 59

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