More strategic mindset needed to accelerate investment in energy storage and address the energy security imperative

EY LLC, Kyiv, Ukraine, 
Mon, June 22, 2015

u  Market tofocus on making storage “just another” energy asset

u  Governmentproactivity prompts positive index movements

u  Ukraine still remains outside of thetop 40 countries, but the recent legislative initiatives may send out apositive signal to investors

LONDON, KYIV,22 JUNE 2015. Tapping into the transformative power of storage to meet energy securitydemands requires a change of mindset to accelerate investment, according toEY’s latest Renewable energy country attractivenessindex (RECAI).

Storage:Just another energy asset?

The report concludes that, so far,it’s been difficult for investors to get a clear view of the opportunities,business models and most suitable markets when it comes to energy storage. To changethis, and increase funding for accelerated activity across the storage assetlife cycle, the market must highlight the various entry points for investorsand focus on creating an investable asset class for storage products thatdelivers the necessary returns.   

Ben Warren, EY’s Global Power& Utilities Corporate Finance Leader and RECAI Chief Editor, says: “With a number of storage technologiesalready proven and costs falling fast, we must stop thinking about storage assomething that will arrive tomorrow. It arrived yesterday and the game isalready changing. It’s time to start viewing storage as just another energyasset that generates long-term predictable revenues and needs competitive andappropriate construction capital solutions.”

Empoweringthe Mediterranean

Energy storage technology willinevitably become a cornerstone of the energy transformation currently underwayin the Mediterranean region. With unsustainably high unemployment and a lack ofsecure affordable energy a common theme across the entire region, the reporthighlights how a more strategic focus on energy security can be a catalyst forbroader economic and societal benefits.

This view emerged from a group ofhigh-profile energy experts speaking at the recent EY Strategic Growth^® Forum in Rome, which convened morethan 600 CEOs, policymakers, investors and entrepreneurs to explore how tounlock the potential of the Mediterranean region. 

Warren says: “The Mediterranean regioncan use energy as a way of securing its own future. But to achieve this,policymakers must level the playing field, the industry must drive down costand investors must be willing to innovate. Clear objectives to acceleraterenewable energy capacity build-out — which is quickly becoming the mostcost-effective way to tackle energy security issues — combined with theeffective deployment of storage technologies, will undoubtedly shape the investment attractivenessof different markets in the months and years ahead.”

Feelingpositive

WhileChina'snumber one position prevents a rise up the rankings, recent positivedevelopments are still worthy of note. Particularly as March saw the Governmentpublish the first detailed plan on electricity market reform in over a decade,seeking to liberalize the sector. The latest forecasts project more than 100GWof additional onshore wind capacity over the next four years, while theGovernment has also increased the solar capacity eligible for subsidies in 2015from 15GW to 17.8GW.

Indiacontinues its climb up the index, replacing Japan in fourth place. The latest forecasts estimate around 13GWand 10GW of new wind and solar capacity respectively over the next four yearsalone, while policy targeting 1GW of geothermal capacity by 2022 is currentlybeing drafted as the first phase of a potential 10GW plan. The Government alsoplans to increase the renewable purchase obligation of large power distributorsfrom 3% to 8%.

Poland’s newlegislation shifting to auction-awarded FITs and premiums from 1 January 2016was finally signed into law in March, providing the market with a greaterdegree of policy stability. While the latest wind forecasts of 1.5GW to 2.3GWnew capacity in the coming years will inevitably assume a rush to secure greencertificates, the figures are still encouraging for a market previouslyparalyzed by policy uncertainty.

Reportsthat Romania’s cabinet is in talkswith the energy market regulator and private sector to determine possiblechanges to the support program that would make renewables investments“profitable again” suggest a more positive outlook for the market. While marketanalysts remain divided on the outlook, with near-term wind forecasts ranging600-2,100MW and additional solar capacity of 300-500MW, these are stillrelatively encouraging figures given the recent investment stalemate.

Egypt hasmoved up to 37th place following its re-entry in Issue 43, reflecting itsstable and attractive support regime and rapidly growing project pipeline.Developers have barely paused for breath since the country unveiled its 4.3GWrenewables program, while Government has also signed agreements with fourinternational consortia in recent months to develop a further 9GW of capacity.

Konstantin Taranets, ‎Seniorconsultant, Cleantech and Sustainability Services, EY in Ukraine: “Ukrainestill remains outside of the top 40 countries of the Index because of economicand political instability, and low investment activity. Despite this, it isexpected that the recent legislative initiatives (Bill No 2010-d "On amendmentsto certain laws of Ukraine to ensure competitive conditions for the production of electricityfrom alternative energy sources"),which ensure investment attractiveness of such projects, will send out apositive signal to investors and will improve the situation in the sector”.

Todownload the report, visit: www.ey.com/RECAI.

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About the RECAI

The RECAI report ranks its 40entries on the attractiveness of their renewable energy investment anddeployment opportunities, based on a number of macro, energy market andtechnology-specific indicators. 

The index rankings tracks 40 markets worldwide: Australia, Austria,Belgium, Brazil, Canada, Chile, China, Denmark, Egypt, Finland, France,Germany, Greece, India, Indonesia, Ireland, Israel, Italy, Japan, Kenya,Mexico, Morocco, the Netherlands, Norway, Peru, the Philippines, Poland,Portugal, Romania, Russia, Saudi Arabia, South Africa, South Korea, Spain,Sweden, Taiwan, Thailand, Turkey, UK and the US.

About EY’s GlobalPower & Utilities Sector

In a world of uncertainty, changing regulatory frameworks andenvironmental challenges, utility companies need to maintain a secure andreliable supply, while anticipating change and reacting to it quickly. EY’sGlobal Power & Utilities Sector brings together a worldwide team ofprofessionals to help you succeed — a team with deep technical experience inproviding assurance, tax, transaction and advisory services. The Sector teamworks to anticipate market trends, identify their implications and developpoints of view on relevant sector issues. Ultimately, this team enables us tohelp you meet your goals and compete more effectively.

For more information, please visit ey.com/powerandutilities.