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Germany leads UK in offshore wind electricity funding race - KPMG

15 May 2012 12:35:07 | edem

Germany is attracting "significantly" more interest from renewable energy investors than the UK despite having slashed subsidies for clean electricity generation, a new report has found. But the battle for funding is far from over, according to one analyst.

Europe's largest electricity market beat the UK into second place by a substantial margin, according to "Green Power 2012" from financial services giant KPMG, published on Tuesday. "One large potential growth area is offshore wind, which the [German] government has prioritised as its replacement for nuclear," the report said.

The results will make grim reading for the UK, which has been locked in a battle with Germany for the past year to attract capital into its offshore wind sector since Germany's decision to walk away from nuclear power (see EDEM 31 October 2012).

The study is the first solid evidence that a leader in the two-horse race has emerged.

According to the study, 21% of corporate and investor respondents worldwide plan to target Germany over the next 18 months, "significantly more" than the 12% considering the UK, the 9% eyeing Italy, the 6% considering France, or the 3% that may spend in Spain. Germany plans to install 10GW of offshore wind by 2020, with the UK aiming for a huge 21GW (see EDEM 9 January 2012).

But KPMG power and utilities head Andy Cox told ICIS on Thursday that the race was far from run, as the UK has yet to unveil details of its long-term support regime for low-carbon power generation - a move that the government said on Wednesday would happen "shortly" (see EDEM 9 May 2012). Construction risk was also an issue, but that could be alleviated."Standing back, if those things can be dealt with, I see the UK moving forwards very rapidly, so I don't think it's fair to say that Germany is ahead of the UK," Cox said.

Subsidy storm

The German renewables market has weathered the storm of enforced subsidy cuts striking many countries across the cash-strapped eurozone without investors losing interest, because the cuts "have been communicated to the market in a highly transparent manner", according to the report (see EDEM 28 March 2012).

Globally, Germany was ranked joint-third alongside China, with 23% eyeing India, and 46% looking into the US.

Despite the relatively buoyant level of interest, KPMG warned that the positive sentiment of investors today could be "badly affected" by the risk of retroactive tariff cuts across Europe. "The investment climate remains fragile," Cox said. "While it is exciting to see so many respondents expecting to invest in green energy in the near future, this could all turn on a dime if struggling governments continue to retrospectively cut tariffs and so damage confidence."

According to the study, 76% of the respondents who agreed that renewable assets had become attractive on the basis of their long-term low risk returns said that the risk of retroactive tariff cuts would affect confidence in the sector as a whole.

Retroactive cuts were introduced in Spain last year as part of a bid to get a grip on the nation's budgetary deficit (see EDEM 28 December 2011), while all green subsidies were frozen in January (see EDEM 27 January 2012).

The Czech Republic is also mulling ending all renewable subsidies from 2014 (see EDEM 26 April 2012 and separate story). JS

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