A report by Bloomberg New Energy Finance found that financial investment in large-scale renewable energy in Europe fell by 22% in 2010, and new financial investment in renewables in developing nations overtook that in developed nations. However, despite some immediate challenges, Datamonitor believes that Europe will fare better in attracting financial investment into renewables in the long term.
One such challenge facing Europe will be the cut in solar feed-in tariffs, with the UK, Spain, Italy, and Germany all having reduced their tariffs. In the UK, this led Marks & Spencer to cancel its plans for a solar array, and no doubt other firms will follow suit. A recent report from Kingspan stated that the rate of return on UK solar projects over 50kW will be reduced to less than 5%.
However, with Germany going nuclear-free by 2022, it is attempting to achieve a minimum annual growth in solar capacity of 3.5GW and it will also not be going ahead with any further solar feed-in tariff cuts. Furthermore, Germany expects an accelerated move to renewable energy, as the country aims to double the contribution of renewables to electricity production to 35% by 2020.
A recent study by BVG Associates states a belief that the whole-life real costs of offshore wind (including operational costs, energy yield, and capital expenditure) are expected to fall by 15% over the next 10 years. This would help to spur investment in Europe, given the continent's lead in offshore wind.
These efforts should be further bolstered by the EU launching a E265m fund to kick-start energy efficiency and renewable projects. Additionally, a report by mergermarket.com suggests M&A activity is set to increase in the next year, with "67% of respondents expecting Europe to be at the forefront of this increase."
However, the International Energy Agency's World Energy Outlook says that investment in renewables fell by 20% from late 2008 to 2009, and would have fallen by 30% had it not been for government stimulus packages. There are various sovereign debt crises in Europe, while the US is also facing problems, and these will clearly hamper the ability of governments to provide further support. Meanwhile, China and India are showing close to double-digit GDP growth, and this will prove to be the biggest immediate challenge in the competition for financial investment into renewables between developed and developing nations.