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Executive summary and Key findings
Executive summary
1Investment in renewables is increasing From offshore and onshore wind to photovoltaic and thermal solar, hydropower, geothermal, and biomass, more and more investors are entering the renewables arena — including oil and gas companies searching for opportunities. Based on the survey of 200 seniorlevel investors in this sector, from ASPAC, EMA and the Americas, they are searching for large-scale projects in countries with welcoming regulatory environments. Subsidies, tax incentives and direct investment are also mentioned as appealing prospects for investment.
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2Government policy and financial backing can make markets more appealing Germany is at the heart of this investor activity, due to its stable regulatory landscape and continuous development plans for renewables. Respondents expect the country to see the biggest rise in M&A activity in the next 12 months, ranking it the western European country where they are most likely to invest. China is attracting similar interest, based largely on its deep pockets and long-term renewables strategy. The government plans to invest 2.5 trillion Yuan (US$377 billion) in renewable power generation as part of its 13th Five-Year Plan on energy development, increasing installed capacity to 680GW by 2020.
France and the United States, meanwhile, sit further down the lists. While ranked fourth globally on the survey’s favorable policy country list (see page 39), just 3 percent of respondents say France has the most favorable policies for promoting investment in renewables, while the US has the least favorable among advanced economies according to 43 percent of respondents.
Fifteen percent of respondents say they expect France to see the biggest rise in M&A activity, more than the US at 10 percent. But a healthy percentage say that the election of President Macron makes them more likely to invest in renewables in France in the future, whereas the current US administration’s move away from the Paris Agreement does not inspire confidence.
3Some sub-sectors are attracting more interest than others While policy can provide assurance, some sub-sectors are the real attraction for investors. Respondents say offshore wind will see the biggest rise in M&A over the next 12 months, followed by hydropower, photovoltaic solar and thermal solar, while smallerscale technology like biogas remains under-represented. Innovation in secondary technology like storage and energy aggregators is also proving to be important in investment decisions, as they contribute to stability and security of supply.
4There are still obstacles to investment, even as valuations continue to rise
As always, there are challenges to overcome in renewables, not least of which is the transition from FITs to auction-based support regimes.
According to 40 percent of respondents, this increases the risk that some low-price projects may never be built. It also encourages consolidation as developers struggle to generate a profit, creating uncertainty and prompting a decrease in the strike price, which may hit those depending on such schemes to raise capital.
Investors also point out that this interest in renewable energy assets is pushing up prices. Valuations are expected to rise for offshore renewables over the next 24 months, followed by photovoltaic solar, hydropower and thermal solar. Overall, the future looks bright for renewables, in terms of their ongoing development and implementation as well as their return on investment. But investors should remain cautiously optimistic as there remain obstacles to be overcome and risks to mitigate.
Key findings
198 deals in renewables globally, worth EUR22.5 billion (H1 2017) 62% of respondents say the election of President Macron has increased the appetite for investment in renewables in France
98% of respondents say battery storage is important when considering an investment in any future renewable energy projects
74% H Hydrogen 1.008 1 believe hydrogen will be a significant enabler for the advancement of renewable energy
91% say renewable energy aggregators will be important in facilitating investment in renewable energy projects Which sub-sectors can expect a rise in valuations in the next 24 months?
82% offshore renewables
81% photovoltaic solar
68% hydropower
51% thermal solar
25% of respondents say obtaining planning permits and licenses is the main concern for those considering an investment in renewables
Which sub-sectors can expect the biggest increases in M&A activity in the next 12 months?
43% Offshore wind 39% Hydropower 16% Photovoltaic solar 1% Thermal solar 1% Onshore wind
Which regions can expect the biggest increases in M&A activity in the next 12 months? 47% EMA
5% North America
8% Latin America
40% ASPAC
Policy drivers
60% say Germany’s policies are the most favorable among advanced economies for investment in renewables
43% say the US has the least favorable policies among advanced economies for promoting investment in renewables Countries with the biggest increases in M&A activity expected in the next 12 months: 40% Germany 40% China 26% UK 21% India 15% France 10% US 8% Brazil 7% Canada 6% Japan 5% Australia
41% of respondents say subsidies are the most important measure for driving investment in renewables
